Presently before the Court are three motions to dismiss. First, Defendants Lion Capital LLP, Big Catch Cayman LP, and Lion Capital (Americas), Inc. (the "Lion Defendants," "Lion Entities," or "Defendants") filed a Motion to Dismiss the Cherokee Nation's Complaint, (ECF No. 997). Plaintiff the Cherokee Nation's filed an Opposition to, ("Nation Opp'n," ECF No. 1233), the Motion.
Second, the Lion Defendants filed a Motion to Dismiss the Bashas' Plaintiffs'
Third, the Lion Defendants filed a Motion to Dismiss, ("Four Track MTD," ECF No. 1248), the operative complaints
The Court heard oral argument for all three motions on July 30, 2018. Having considered the parties arguments, the evidence, and the law, the Court rules as follows.
BACKGROUND
The case concerns an alleged conspiracy to fix the prices of packaged seafood throughout the United States. Plaintiffs Bashas' Inc., Marc Glassman, Inc., and 99 Cents Only Stores LLC are businesses that have purchased packaged seafood from the three largest domestic producers of packaged seafood products. ("Bashas Compl.," No. 17-CV-2487, ECF No. 1, ¶¶ 16-18.)
This particular aspect of the MDL deals with three Defendants, who are specially appearing: Lion Capital LLP, Lion Capital (Americas), Inc., and Big Catch Cayman LP. Defendant Lion Capital LLP ("Lion Capital") is a British private equity firm organized under the laws of the United Kingdom ("U.K."). (Bashas Compl.
Defendant Lion Capital (Americas), Inc. ("Lion Americas") is a Delaware corporation with its principal place of business in Santa Monica, California. (MTD 11.) Lion Americas moved its office from New York to Santa Monica in October 2012. Lion Americas provides investment advice regarding investments in North America to Lion Capital, which Lion Capital considers on behalf of the investment funds that it manages. (Id. )
Defendant Big Catch Cayman LP ("Big Catch") is a holding company organized under the laws of the Cayman Islands and has no offices or employees. (Bashas Compl. ¶ 272; MTD 11.) Big Catch's only assets are its interest in Bumble Bee Holdco SCA, a subsidiary and owner of Bumble Bee's equity, and its interest in an unrelated technology company. (MTD 11.) Plaintiffs allege that Lion Capital owns a majority share of Big Catch. (Bashas Compl. ¶ 272.)
I. Pre-Purchase Activities and Lion's Purchase of Bumble Bee
The Bashas Plaintiffs allege that Lion Capital purchased Bumble Bee in December 2010 from a private equity firm. Centre Partners Management LLC, for $980 million. (Id. ¶ 270.) Plaintiffs further allege on information and belief that Lion Capital had access to Bumble Bee's financial and other records in the course of due diligence that it conducted for the acquisition. This, along with access to Bumble Bee senior executives, allegedly caused Lion Capital to learn of the ongoing conspiracy.
II. Post-Purchase Activities by Lion Entities
Plaintiffs claim that after purchasing Bumble Bee, Lion Capital team members became "intimately familiar with Bumble Bee's business" and demonstrated that knowledge by regularly reporting facts concerning Bumble Bee to investors as part of periodic portfolio reviews. (Id. ¶ 280.) And, according to Plaintiffs, Lion Capital's acquisition of Bumble Bee, while Bumble Bee was earning "supra-competitive profits," positioned Lion to realize an increase in Bumble Bee's market value and eventual sale price. (Id. ¶ 279.)
In addition to receiving information, Plaintiffs allege Lion Capital took an active role in the ongoing conspiracy after [Redacted] (Id. ¶¶ 283-84.) Lindberg also met with Thai Union's chief executive in January 2011, where Plaintiffs allege "they discussed the conspiracy." (Id. ¶ 284.) In the months following Lion's purchase of Bumble Bee and Lindberg's meetings, defendants Chicken of the Sea, Bumble Bee, and Del Monte/StarKist agreed to increase their prices in May 2011. (Id. ¶ 285.) By the fall 2011, Chicken of the Sea, Bumble Bee, and StarKist increased their efforts to police each other's promotional pricing. (Id. ) Lion allegedly took an active role in enforcement as evidenced by Lindberg deciding to meet again with senior at Dongwon. (Id. ¶ 286.) [Redacted]. (Id. )
Plaintiffs allege that Bumble Bee continued to keep the Lion entities informed of anticompetitive behavior; for example, [Redacted]. (Id. ¶ 287.) However, [Redacted]. (Id. ) Plaintiffs allege that [Redacted]. (Id. ¶ 287 n.10.) [Redacted]. (Id. ) Bumble Bee increased its prices on January 17, 2018. [Redacted]. (Id. ¶ 288.)
[Redacted]. (Id. ) [Redacted]. (Id. ) On February 3, 2012, Lindberg sent an email response to an executive at Thai Union, who had asked Lindberg if he had suggestions how they could "[Redacted]. (Id. ¶ 289.) Lindberg's email stated: [Redacted]." (Id. )
On [Redacted] as well as an agreement between the defendants not to label their packaged tuna as "FAD-free."
[Redacted].
(Id. (emphasis omitted).) [Redacted]. (Id. ¶ 294.) In addition to Mr. Lindberg's meetings and communications, [Redacted]. (Id. ¶ 296.)
In December 2014, Lion was able to report Bumble Bee's earnings (i.e., its earnings before interest, taxes, depreciation, and amortization or "EBITDA") were a "record-breaking $150 Million," based on revenue of $1 billion. (Id. ¶ 297.) Plaintiffs allege the "record-breaking" financial performance was due to the ongoing conspiracy. (Id. ) On or about December 18, 2014, Thai Union announced that it intended to acquire Bumble Bee. (Id. ¶ 84.) [Redacted]. (Id. ¶ 279.) As part of the acquisition process, Thai Union and Bumble Bee submitted their proposal to the Department of Justice ("DOJ"). The merger review apparently led to a criminal investigation.
III. Department of Justice Investigation
Since at least 2015, various defendants have been under criminal investigation for antitrust violations as evidenced by Thai Union Group's confirmation it received a subpoena and was fully cooperating with a DOJ investigation. (Nation FAC ¶ 214.) On July 23, 2015, Bumble Bee publicly acknowledged receipt of a grand jury subpoena. (Id. ¶ 217.) On December 3, 2015, Thai Union Group announced it was terminating its acquisition of Bumble Bee. (Id. ¶ 84.) And, the DOJ issued a press release stating:
"Consumers are better off without this deal," said Assistant Attorney General Bill Baer [ ("Baer") ] of the department's Antitrust Division. "Our investigation convinced us-and the parties knew or should have known from the get go-that the market is not functioning competitively today, and further consolidation would only make things worse."
(Id. )
On December 7, 2016, the DOJ filed a criminal information against Scott Cameron, Bumble Bee Senior Vice President, who pled guilty on January 25, 2017. (Id. ¶ 221.) On December 21, 2016, the DOJ filed a criminal information against Ken Worsham, also a Bumble Bee Senior Vice President, who pled guilty on March 15, 2017. (Id. ¶ 222.) The plea agreements for these two defendants, as well as a third executive at StarKist, stated that they participated in a conspiracy within the packaged seafood industry to fix, raise and maintain the price of package seafood in the United States. (Id. ¶ 224.)
On May 8, 2017, DOJ filed criminal information against Bumble Bee and the entity pled guilty to its role in a conspiracy to fix the price of packaged seafood products in the United States on August 2, 2017. (Id. ¶¶ 227-28.) Bumble Bee agreed to pay a criminal fine of $25 million, but that amount will increase to a maximum fine of $81.5 million payable by Big Catch, in the event of a sale of Bumble Bee, subject to certain terms and conditions that are sealed in the criminal case. (Id. ¶ 228.) Most recently, Bumble Bee CEO Chris Lischewski was indicted on May 16, 2018.
LEGAL STANDARD
I. Rule 12(b)(2)
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2) challenges the Court's personal jurisdiction over a party. The plaintiff bears the burden of establishing that jurisdiction is proper. Boschetto v. Hansing ,
A court's power to exercise jurisdiction over a party is limited by both statutory and constitutional considerations. First, a long-arm statute must confer jurisdiction over a defendant. Pebble Beach Co. v. Caddy ,
Any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district whereof it is an inhabitant, but also in any district wherein it may be found or transacts business; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found.
Second, the Fourteenth Amendment's Due Process clause limits the personal jurisdiction of state courts. Bristol-Myers Squibb Co. v. Superior Court of Cal., S.F. Cnty. , --- U.S. ----,
"In a statute providing for nationwide service of process, the inquiry to determine 'minimum contacts' is thus "whether the defendant has acted within any district of the United States or sufficiently caused foreseeable consequences in this country." " Action Embroidery ,
II. Rule 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the defense that the complaint "fail[s] to state a claim upon which relief can be granted," generally referred to as a motion to dismiss. The Court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a "short and plain statement of the claim showing that the pleader is entitled to relief." Although Rule 8"does not require 'detailed factual allegations,' ... it [does] demand more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal ,
Where a complaint does not survive 12(b)(6) analysis, the Court will grant leave to amend unless it determines that no modified contention "consistent with the challenged pleading ... [will] cure the deficiency." DeSoto v. Yellow Freight Sys., Inc. ,
ANALYSIS
I. General Jurisdiction
General personal jurisdiction allows a plaintiff to hale a nonresident defendant into the forum state's court "to answer for any of its activities anywhere in the world." Martinez v. Aero Caribbean ,
A corporation will primarily be "at home" for the purposes of general jurisdiction in two paradigmatic forums: its place of incorporation and its principal place of business. Id. at 137,
A. Whether the Court Has General Jurisdiction over Lion Capital and Big Catch
1. Defendants' Arguments
Defendants argue that there is no general jurisdiction over Lion Capital and Big Catch. (MTD 18.) Specifically, they contend Lion Capital is organized under the laws of the U.K. and has its principal place of business in the U.K. (Id. (citing Brown Decl. ¶ 3-4; 10-11, 15).) Big Catch is organized under the laws of the Cayman Islands and has no employees or offices in the United States. (Id. (citing Brown Decl. ¶ 18).) Defendants acknowledge that Big Catch has a New York mailing address but cite an unpublished district court opinion for the proposition that a mailing address is insufficient to establish a principal place of business. (Id. (citing In re Hydroxycut Mktg. & Sales Practices Litig. , No. 09 MD 2087-BTM (AJB),
2. Plaintiffs' Arguments
Plaintiff the Cherokee Nation contends that Lion Capital and Big Catch are subject to the Court's general jurisdiction.
The DPP Plaintiffs also argue general jurisdiction is appropriate. They contend that the vast majority of Lion Capital's business focuses on the United States. (DPP Opp'n 24.) For example, Lion Capital previously testified in another lawsuit that two-thirds of its capital comes from U.S. investors and many of the companies owned by Lion Capital's funds are U.S. companies. (See
3. Defendants' Reply
In reply, Defendants reiterate that Plaintiffs fail to establish either Lion Capital or Big Catch are essentially at home in the United States and that general jurisdiction does not exist despite the presence of a few former Lion Capital members and Big Catch shareholders in the United States. (Reply 10.) In support of this proposition, Defendants cite cases holding that a court should not exercise general personal jurisdiction over a limited partnership based solely on the citizenship of its members. (Id. at 10-11 (citing Carruth v. Michot , No. A-15-CA-189-SS,
4. Court's Analysis
a. Paradigmatic Locations
The paradigmatic location for general jurisdiction depends, in part, on the type of entity; for an individual it is her domicile, or for a corporation it is where the corporation is fairly regarded as "at home."
Big Catch is a holding company with no employees and no offices and was organized under the laws of the Cayman Islands. (Brown Decl. ¶¶ 18, 21.) Its partnership agreement recites that Big Catch's principal place of business was the former Lion Americas' office in New York or wherever the general partner designates. (LION_14788, at 794.) Defendants maintain that the New York address is simply a mailing address and is insufficient for general jurisdiction. (MTD 18 n.5 (citing In re Hydroxycut Mktg. & Sales Practices Litig. ,
The Court agrees with Defendants as to Big Catch. Big Catch has no office of its own; it listed Lion Americas' New York office as its principal place of business in the general partnership agreement. But, the New York office is simply a mailing address for Big Catch. This is evident because the partnership agreement says "c/o" or care of the New York address and there is no indication whether or not Big Catch conducts independent activities there. Big Catch is merely a holding company and designating an already existing office to act as a mailing address does not confer general personal jurisdiction. Therefore, the Court finds neither Lion Capital nor Big Catch is at home in the United States under the two paradigmatic locations.
Finally, the Court turns to the exceptional case requirement; two cases illustrate the requirements to apply general jurisdiction. In Helicopteros Nacionales de Colombia, S.A. v. Hall ,
Here, Lion Capital's designated member allegedly traveled to the United States to attend board of directors' meetings. (See, e.g. , LION_4334.) Lion Capital availed itself of the PTO by registering two trademarks and later defended those trademarks in the U.S. judicial system. Lion members attending board meetings are similar to the facts of Helicopteros and Ranza because, like those cases, Lion's executive(s) traveled to the relevant forum. And, using the PTO and the courts to defend a trademark is similar to conducting limited business in Helicopteros (purchasing helicopters) and Ranza (sending products to Oregon). Neither is sufficient to meet the exceptional case requirement.
The presence and holding out to the public of the office in New York and, later, Los Angeles, presents a more viable contact to assess the exceptional case requirement. It is clear that Lion Capital held out Lion Americas' North American office as belonging to Lion Capital generally or Lion Capital specifically. (See LION_6955, at 2; LION_4213.) Yet, post- Daimler , the presence of offices in the forum state does not, by itself, render a defendant subject to general jurisdiction. See
Daimler teaches that it is appropriate to compare business operations in the forum state with an entity's worldwide
Further, Big Catch does not meet the exceptional case requirement because it is a holding company. Plaintiff has not alleged any actions undertaken by Big Catch, which is not surprising as Big Catch is a holding company and not an operating company. Thus, it cannot meet the exceptional case requirement.
In sum, the foregoing activities do not suggest that Lion Capital's operations were "so substantial and of such a nature as to render [it] at home in" the United States. Daimler ,
B. Whether the Court Has General Jurisdiction over Lion Americas
Defendants do not dispute that Lion Americas is properly before this Court. Lion Americas has a principal place of business in Santa Monica, California, which would subject it to general jurisdiction in California, and thus the United States. (See Brown Decl. ¶ 24.) Accordingly, this Court has personal jurisdiction over Lion Americas.
C. Whether Lion Americas' Contacts Impute to Lion Capital
Plaintiff the Cherokee Nation argues "it is through [Lion] Americas that Lion Capital solicits and engages in business in California, making itself 'at home' there." (Nation Opp'n 29 (citing Newport Components, Inc. v. NEC Home Electronics, Inc. ,
"The existence of a parent-subsidiary relationship is insufficient, on its own, to justify imputing one entity's contacts with a forum state to another for the purpose of establishing personal jurisdiction." Ranza ,
The Ninth Circuit previously held that district courts could test corporate separateness through either an agency relationship or an alter ego test. See
Daimler also makes clear that even if the Court determines that one entity is the alter ego of the other, then foreign entity's activities in the forum jurisdiction must still meet the general jurisdiction requirements of being essentially "at home."
The Court applies the two-part alter ego test to determine whether Lion Americas' contacts with the United States impute to Lion Capital.
1. Unity of Interest
a. Plaintiffs' Arguments
Plaintiffs elucidate three broad categories of control by Lion Capital over Lion Americas. First, Plaintiffs rely on the method by which Lion Capital does business and holds itself out to the public. For example, Lion Capital held itself out as
Second, several employees had roles in both Lion Capital and Lion Americas. For example, Mr. Richard Lewis was the director of Lion Capital Management Services Limited, which is a Lion Capital member; Mr. Lewis was also the Chief Compliance Officer of Lion Americas. (Nation Opp'n 14 (citing LION_14076, at 90).) And, Mr. Rory O'Connor was designated as Lion Americas' agent for service of process, (id. at 14-15 (citing LION_14062) ), while also a Lion Capital member, (id. at 15 (citing LION_14360, at 377) ). Lion's websites of these gentlemen do not distinguish between Lion Capital and Lion Americas. (DPP Opp'n 28-29.) And, Lion Capital has disclosed that it was paying wages to select Lion Americas' employees at the same time Lion Americas was paying those individuals. (Id. at 29 (citing Brown Decl., Ex. E).) Finally, Lion Capital's annual return identified Lion Americas' executives (Chang and Capps) as members of Lion Capital. (Id. (citing Declaration of Samantha Stein ("Stein Decl."), Ex. 34, ECF No. 1292-13).)
Third, Lion Capital submitted a Securities and Exchange Commission ("SEC") Form ADV. That form identified Lion Americas as a "related person" controlled by Lion Capital, states the two entities are under common control, and states the two entities share supervised persons. (Nation Opp'n 29 (citing LION_14557, at 563; and LION_14667, at 673-74).) Further, the same filing disclosed that Lion Americas kept its "books and records" with Lion Capital (DPP Opp'n 27.) Based on this evidence, Plaintiffs conclude that Lion Capital controls Lion Americas such that personal jurisdiction would be appropriate over Lion Capital. (Id. at 29-30.)
b. Defendants' Reply
Defendants argue that Plaintiffs fail to establish unity of interest. (Four Track Reply 17.)
Third, Defendants contend that Lion Americas' oversight of Bumble Bee supports their jurisdictional arguments. (See
c. Court's Analysis
The unity of interest element requires "a showing that the parent controls the subsidiary to such a degree as to render the latter the mere instrumentality of the former." Ranza ,
Conversely, in Unocal , the Ninth Circuit discussed situations when alter ego is not appropriate. There, the court held that the plaintiff did not meet the unity of interest prong when the evidence demonstrated "an active parent corporation involved directly in decision-making about its subsidiaries' holdings," but the parent and subsidiaries "observe[d] all of the corporate formalities necessary to maintain corporate separateness."
(1) involvement in its subsidiaries' acquisitions, divestments and capital expenditures; (2) formulation of general business policies and strategies applicable to its subsidiaries, including specialization in particular areas of commerce; (3) provision of loans and other types of financing to subsidiaries; (4) maintenance of overlapping directors and officers with its subsidiaries; and (5) alleged undercapitalization of its subsidiaries.
Unocal ,
Turning to the case at hand, the Court begins with the baseline observation that Lion Americas is a wholly owned subsidiary of Lion Capital. (Brown Decl. ¶ 6.) Defendants state that Lion Capital and Lion Americas "maintain strict divisions between their management structures in order to comply with the Alternative Investment Fund Managers Directive ("AIFMD"), a European Union regulation." (Id. ¶ 27.) To ignore the corporate distinction between these two entities, Plaintiffs must demonstrate more than direct involvement in financing and macro-management of the subsidiary; Lion Capital must "dictate [e]very facet [of Lion Americas'] business." Unocal ,
Plaintiffs point to shared offices between Lion Americas and Lion Capital. It is clear that Lion Americas had an office in New York, which later moved to Los Angeles. It is also certain that both Lion Americas and Lion Capital held out these North America offices as generally belonging to the Lion entities. It is not evident from the record which entity actually owned the offices. Other district courts have found that simply because a parent holds out its subsidiary's office without the parent mentioning that the latter is a separate entity is not definitive evidence that the parent controls day-to-day operations over the subsidiary. See Pokemon Co. Int'l, Inc. v. Shopify, Inc. , No. 16-MC-80272-KAW,
Next, Plaintiffs point to shared members between Lion Americas and Lion Capital. For example, Messrs. Lindberg, Lewis, O'Connor all had roles in both Lion Americas and Lion Capital And, those individuals held themselves out to the public, both on websites and email as working for Lion Capital Yet, Unocal and Ranza both make clear that shared members is not sufficient to establish alter ego liability. See Ranza ,
The remaining evidence submitted by Plaintiffs is likewise unpersuasive. Lion Capital's Form ADV demonstrates that Lion Americas was a "related person" and that the two entities are under common control. (See LION_14557, at 563; LION_14667, at 673-74.) As the DPP Plaintiffs explain, the SEC defines control as "[t]he power, directly or indirectly, to direct the management or policies of [Lion Americas] whether through ownership of securities, by contract, or otherwise." (DPP Opp'n 27 (alterations in original).) Directing the management or policies of a wholly owned subsidiary is entirely in line with Ranza and Unocal 's admonition that a parent may be involved in managing its subsidiary as long as they maintain corporate formalities necessary for corporate separateness. Moreover, the fact that Lion Capital complied with the SEC's disclosure requirements in the first instance buttresses the conclusion that it observes corporate formalities. Finally, Lion Americas' status as a "non-discretionary investment advisor" to Lion Capital does not explain how such a status deviates from the normal parent-subsidiary relationship.
To summarize the Ninth Circuit's guidance concerning unity of interest: "A parent corporation may be directly involved in financing and macro-management of its subsidiaries ... without exposing itself to a charge that each subsidiary is merely its alter ego." Ranza ,
2. Alter Ego Conclusion
The DPP Plaintiffs argue that an inequitable result would follow because Lion Capital would not be held accountable for its acts and involvement in Bumble Bee. (DPP Opp'n 29.) Because Plaintiffs fail to carry their burden to demonstrate unity of interest, the Court does not reach the inequitable result argument.
Deviating from the rule of corporate separateness is an extreme remedy, sparingly used. Sonora Diamond Corp. v. Superior Court ,
Finally, even if the Court were to assume that Lion Americas' contacts impute to Lion Capital, there is no still no basis to subject Lion Capital to general jurisdiction because the combined Lion Americas and Lion Capital contacts with the United States are not sufficient to render Lion Capital at home in the United States when considering the entirety of Lion Capital's contacts. See Daimler ,
II. Specific Jurisdiction
Due process "constrains a State's authority to bind a nonresident defendant to a judgment of its courts." Walden v. Fiore ,
There are two principles undergirding the defendant-focused inquiry. "First, the relationship between the nonresident defendant, the forum, and the litigation 'must arise out of contacts that the "defendant himself " creates with the forum State.' " Axiom Foods ,
Courts apply a three-part test to exercise specific jurisdiction over a non-resident defendant:
(1) the defendant either "purposefully direct[s]" its activities or "purposefully avails" itself of the benefits afforded by the forum's laws; (2) the claim "arises out of or relates to the defendant's forum-related activities; and (3) the exercise of jurisdiction [ ] comport[s] with fair play and substantial justice, i.e., it [is] reasonable."
Williams v. Yamaha Motor Co. ,
Where a case sounds in a tort, courts employ the purposeful direction test. See Axiom Foods ,
Before applying the Ninth Circuit's three-part test for specific jurisdiction, the Court takes a detour into the realm of alter egos and imputing contacts. Plaintiffs assert a variety of facts and theories for the purposes of imputing the contacts of two entities already subject to the Court's jurisdiction-Bumble Bee and Lion Americas-to the two entities beyond the Court's jurisdiction-Lion Capital and Big Catch. The Court addresses Plaintiffs' Bumble Bee alter ego arguments first and then applies the traditional specific jurisdiction test. Finally, the Court will address Big Catch's alter ego status.
A. Whether Bumble Bee's Contacts May Be Imputed to Lion Capital
The Bashas Plaintiffs contend that Lion Capital is an alter ego of Bumble Bee and the Court should exercise personal jurisdiction over Lion Capital because of Bumble Bee's contacts. (Bashas Opp'n 27-31, 33.)
1. Whether Lion Capital or Lion Americas Must Own Bumble Bee
Before applying the two-part alter ego test, the Court addresses Defendants' threshold argument. Defendants argue that neither Lion Capital nor Lion Americas is a parent corporation to Bumble Bee. (MTD 25) (citing Brown Decl. ¶ 20); (Reply 19.) From that premise, Defendants conclude that Plaintiffs' alter ego analysis fails because Plaintiffs admit that the Lion entities are not equitable owners of Bumble Bee. (Reply 19 (citing Sonora Diamond ,
The general rule is that a subsidiary corporation is "one that is controlled by another corporation by reason of the latter's ownership of at least a majority of the shares of capital stock." 1 William Meade Fletcher, Cyclopedia of the Law of Corporations , § 26 (rev. ed. 2017) ; see also Dole Food ,
Here, neither Lion Capital nor Lion Americas directly owns Bumble Bee.
The next issue is whether Lion Capital has equitable ownership of Bumble Bee, despite not having direct ownership. Schwarzkopf indicates that equitable ownership is permitted under California law. The DPP Plaintiffs take up this argument stating that Lion Capital acts as Bumble Bee's owner and holds itself out as such; thus, Lion Capital is Bumble Bee's equitable owner. (DPP Opp'n 15 n.9.) Defendants aver that Lion Capital and Lion Americas are not the equitable owners of Bumble Bee because one of Lion Capital's funds owns Big Catch. (Reply 19.) For example, the DPP Complaint discloses an organizational chart that shows that the one of the funds owns Bumble Bee. (Four Track Reply 15 (citing "DPP Compl." ¶ 43, ECF No. 911).) Defendants distinguish cases finding equitable ownership because the Lion entities are not part of the "chain" of Bumble Bee's ownership. (Id. at 16 (citing Tatung Co. v. Shu Tze Hsu ,
In Tatung Co. , the district court discussed whether equitable ownership was sufficient to impose alter ego liability.
Here, Defendant Lion Capital is similar to the managing agent, its funds are similar to interinsurance exchange, and Lion's investors are similar to the subscribers who actually own the fund. Lion Capital may not have owned the fund that ultimately owned Bumble Bee, but it exercised control over the fund and where the fund directed its investments. Further, Lion Americas executives seemed to think that the Lion entities owned Bumble Bee. In November 2012, Mr. Capps of Lion Americas received an email asking to confirm the Bumble Bee ownership structure including a statement to the effect "Lion's share is more than 70%." (LION_4712.) Capps forwarded the email internally, asking "Chang, [please] confirm that we all have ownership at the [Bumble Bee] Holdco level." (Id. ) Chang responded, "Our ownership ... is at a Cayman LP which sits above Bumble Bee HoldCo." (Id. ) This suggests that Lion Americas believed that they, i.e., the Lion entities, "owned" Bumble Bee in some respect. At oral argument, the Bashas Plaintiffs directed the Court to Bumble Bee's criminal plea agreement where the parties to that agreement defined Bumble Bee's "parent companies" to include Lion Capital LLP, Lion Americas,
2. Unity of Interest
a. Defendants' Arguments
Defendants advance three broad arguments why Plaintiffs have not established unity of interest between Bumble Bee and Lion Capital. First, Defendants take issue with Plaintiffs' allegation that Bumble Bee was purposefully undercapitalized by the Lion entities as evidenced by the fact that Bumble Bee maintained a high debt to total capital ratio. (MTD 26 (citing Bashas Compl. ¶ 304).) Defendants cite the proposition that "[d]ifficulty in enforcing a judgment or collecting a debt does not satisfy th[e] [alter ego] standard." (Id. at 26-27 (quoting Sonora Diamond ,
Second, Defendants assert there is no alter ego liability through the four Lion members who sat on Bumble Bee's board of directors. (Id. ) Defendants cite United States v. Bestfoods ,
Third, Defendants consider various activities in the Bashas' Complaint including: employees at Lions Americas receiving regular, detailed reports about Bumble Bee's finances and operations; one of the Lion entities entering into a management agreement to provide advisory services to Bumble Bee; and unspecified Lion executives being involved in four Bumble Bee projects.
b. Plaintiffs' Arguments
Both the Bashas Plaintiffs and the Cherokee Nation submit three broad arguments that Lion entities dominated and controlled Bumble Bee. First, Lion executives received daily, monthly, and other periodic reports regarding Bumble Bee's operations and had direct input into Bumble Bee's business. (Nation Opp'n 38 (citing Nation FAC ¶¶ 47-50); Bashas Opp'n 29 (citing Bashas Compl. ¶¶ 309-15).) Plaintiffs cite one district court opinion that found daily, weekly, and monthly financial reports a relevant factor in the alter ego test. (Nation Opp'n 38 (citing Parker v. DPCE, Inc. , No. CIV. A 91-4829,
Second, the Lion entities appointed three of the four Bumble Bee directors on Bumble Bee's board. (Nation Opp'n 39; Bashas Opp'n 30.) Messrs. Lea, Lindberg, and Capps have all served on the board of directors. (Nation Opp'n 39; Bashas Opp'n 30.) Plaintiffs acknowledge that dominion of the board of directors alone is not sufficient for alter ego, but urges the Court to consider it as a relevant factor in the unity of interest analysis. (Nation Opp'n 39 (citing ECF No. 295, at 14); Bashas Opp'n 30 (same).)
Third, Plaintiffs point to their allegations that Bumble Bee was undercapitalized by the Lion entities. (Nation Opp'n 39 (citing NetApp, Inc. v. Nimble Storage, Inc. , No. 13-CV-5058-LHK HRL,
c. Defendants' Reply
Defendants characterize many of the activities adduced by Plaintiffs as falling within the routine types of oversight that the Ninth Circuit held did not support an alter ego finding in Ranza and Unocal . (Reply 20.) Bumble Bee sending reports to Lion executives, Lion getting involved at a "very granular [level of] knowledge," appointment of board members, and supervision of finances are all consistent with the legitimate actions of a private-equity fund manager. (Id. at 20-21.)
Defendants also take issue with Plaintiffs' undercapitalization theory. They cite a Ninth Circuit definition for undercapitalization as requiring Plaintiffs to demonstrate "the corporate owner" has caused "a corporation [to be] so undercapitalized that it is unable to meet debts that may be reasonably be expected to arise in the normal course of business." (Id. at 24 (alteration in original) (quoting Perfect 10, Inc. v. Giganews, Inc. ,
d. Court's Analysis
As before, the Court examines unity of interest to determine whether "the parent controls the subsidiary to such a degree as to render the latter the mere instrumentality of the former." Unocal ,
First, Plaintiffs argue that the Lion entities' involvement went beyond oversight typical of a portfolio company. This is evident to Plaintiffs because Lion executives received daily, monthly, and other periodic reports regarding Bumble Bee's operations and had direct input into Bumble Bee's business. (Nation Opp'n 38.) Receiving information and providing input on business decisions are exactly the sort of evidence that both the Unocal and Ranza courts examined and held to be insufficient to demonstrate unity of interest. In Unocal , the court was presented with evidence demonstrating the parent was involved in "its subsidiaries' acquisitions, divestments and capital expenditures" as well as "formulation of general business policies and strategies applicable to its subsidiaries."
Here, Plaintiffs have not demonstrated that a Lion entity was involved in, for example, hiring and firing decisions, negotiating contracts, making routine purchase decisions, and other routine day-to-day management operations for Bumble Bee. Cf.
Second, Plaintiffs contend that a Lion entity dominated Bumble Bee's board of directors. As all the parties recognize, several leading cases hold that shared directors, by itself, does not expose the parent corporation to liability for the subsidiary's acts. See Bestfoods ,
Third, the Court addresses undercapitalization.
These allegations are insufficient to demonstrate the type of undercapitalization necessary to pierce the corporate veil. There is no doubt that Bumble Bee carried a higher debt load post-acquisition than it did pre-acquisition. But, whether Bumble
Moreover, the level of debt here does not rise to the same level of undercapitalization in the cases Plaintiffs cite. For example, in Slottow , the entity's initial capitalization was $500,000 and its liabilities were $10 million.
The exception to this is an allegation Bumble Bee would have defaulted in 2011 but for the price fixing conspiracy. The basis for Plaintiffs' for the allegation is that the United States Sentencing Guidelines presumes a ten percent surcharge in price fixing cases and if one were to assume Bumble Bee's profits were reduced by ten percent then Bumble Bee would have defaulted. (See Bashas Compl. ¶ 305 & n.13.)
If a corporation is organized and carries on business without substantial capital in such a way that the corporation is likely to have no sufficient assets available to meet its debts, it is inequitable that shareholders should set up such a flimsy organization to escape personal liability.... If the capital is illusory or trifling compared with the business to be done and the risk of loss, this is a ground for denying the separate entity privilege.
Automotriz Del Golfo De Cal. ,
In sum, the factors Plaintiffs allege do not demonstrate unity of interest to the extent necessary to ignore the traditional corporate separateness. Accordingly, the Court finds that Plaintiffs have not demonstrated unity of interest between Lion Capital and Bumble Bee.
3. Alter Ego Conclusion
Because the Court has determined that Plaintiffs fail to allege unity of interest, the Court need not proceed to the fraud or injustice prong. In sum, the Court finds Lion Capital is not the alter ego of Bumble Bee. The Court turns to the three-part specific jurisdiction test.
The first prong of the specific jurisdiction analysis may be satisfied "even by a defendant 'whose only "contact" with the forum state is the 'purposeful direction' of a foreign act having effect in the forum state.' " Schwarzenegger,
1. Intentional Act
The first prong of the Calder effects test, the intentional act requirement, simply attempts to differentiate between an actual, physical act and an intent to accomplish a result or consequence of an act. See Picot v. Weston,
Defendants argue that Plaintiffs do not allege that Lion Capital committed a single intentional act directly affecting the pricing, marketing, or sale of package tuna. (MTD 19.) Defendants implicitly concede that intentional acts occurred but instead argue those acts should not be imputed to Lion Capital and any intentional acts by Lion Capital do not directly affect the conspiracy. Thus, their argument is better suited for the express aiming prong.
Plaintiff the Cherokee Nation elucidates the following intentional acts. First, Lion Capital placed three Lion Americas executives on Bumble Bee's board of directors, which met in California on a regular basis. (Nation Opp'n 20 (citing Nation FAC ¶ 47).) Lion Americas executives also received financial information from Bumble Bee including [Redacted]. (Id. (citing, e.g., Nation FAC ¶ 49: Lion_3190-93).) Lion Capital members also received detailed information from Bumble Bee executives regarding raw material costs, acquisition issues, and competitive activity. (Id. at 21 (citing, e.g., LION_547).)
Plaintiff also points to Lion Capital executives engaging in Bumble Bee's business operations by:
[Redacted].
(Id. at 20-21 (alterations in original) (quoting Nation FAC ¶ 50).) Lion Americas executives also communicated with Bumble Bee executives allegedly concerning the ongoing conspiracy to set prices. For example, [Redacted]. (Id. at 22 (citing LION_3445-58; and LION_3484; and LION_12605).)
Next, Lion Americas executives reported Bumble Bee dealings to Lion Capital investors, but did not reveal any information relating to price-fixing. (Id. at 22-23 (citing Nation FAC ¶ 51; and LION_4455-64).) Lion Americas executives also attended industry conferences with Bumble Bee executives and met and corresponded with industry competitors and their parent corporations. (Id. at 23 (citing, e.g., Nation FAC ¶ 52; and LION_1772; and LION_2429).)
The Bashas Plaintiffs contend that the intentional acts are intertwined with and reliant on the factual allegations contained in their complaint and that Defendants' argument to the contrary depends on the Court finding that Plaintiffs failed to allege any acts connecting Defendants to the broader conspiracy. (Bashas Opp'n 34-35.) To that end, Plaintiffs assert that they have adequately alleged that Lion, especially
The intentional act threshold is not a high bar. In Bancroft & Masters, Inc. v. Augusta National Inc.,
Here, Plaintiffs detail a variety of intentional acts undertaken by Defendants including receiving information, monitoring Bumble Bee projects, corresponding with Bumble Bee executives, investors, and competitors, and exchanging confidential information. These includes actions taken by Lion Capital partners Lindberg, Capps, and Chang in the scope of their partnership.
With regard to Big Catch, Plaintiffs do not adduce any intentional acts taken by Big Catch itself. Instead, they argue that Big Catch acted through its limited partners, i.e., shareholders, who are themselves members of the conspiracy.
2. Express Aiming
For the express aiming element, the Ninth Circuit has made clear that Calder requires "something more" than a foreign act that has foreseeable effects in the forum state. See, e.g. , Bancroft ,
"An antitrust defendant 'expressly aims' an intentional act at a forum state when its allegedly anticompetitive behavior is targeted at a resident of the forum, or at the forum itself." In re Cathode Ray Tube (CRT) Antitrust Litig. ,
Next, in Western States , the plaintiffs alleged that the defendant's
officers or directors made agreements "which tended to advance or control the market prices of natural gas that its affiliates sold in the United States or in Wisconsin" and that these officers or directors made "strategic marketing policies and decisions" to report prices to natural gas price indices "that affected the market prices of natural gas."
a. Defendants' Arguments
Defendants contend that none of the intentional acts demonstrated that Lion Capital or its employees acted directly to affect the pricing, marketing, or sale of packaged tuna. (MTD 19.) Defendants cite
Defendants also contend that Mr. Lindberg's meetings with competitors do not support the inference of wrongful conduct nor personal jurisdiction over Lion Capital. (Id. ) Defendants state that there are no allegation that the meetings were aimed at the United States or resulted in harm to persons in the United States. (Id. )
b. Plaintiffs' Arguments
Plaintiffs argue that Lion Capital undertook two broad categories of actions: first, managing and oversight of Bumble Bee; second, meeting and communicating in furtherance of the conspiracy. With regard to managing and oversight, Plaintiffs contend Lion Capital placed three executives on Bumble Bee's board of directors, which met in California on a regular basis. (Nation Opp'n 20; Bashas Opp'n 37.) Next, Lindberg, Capps, Chang, and Bondy received regular sales and financial reports from Bumble Bee; Lion executives were also involved in day-to-day operations including implementing new projects. (Nation Opp'n 20-21; Bashas Opp'n 37.) Plaintiffs further allege that after board meetings, Lion and Bumble Bee executives would meet in private sessions and did not record minutes. (Nation Opp'n 21 (citing Nation FAC ¶ 50).) Lion executives also approved bonuses and were involved in Bumble Bee's 2011 restructuring request. (Id. )
As to meeting and communications, Plaintiffs allege that Mr. Lindberg and others at the Lion entities communicated with Bumble Bee CEO Lischewski about the conspiracy. (Id. at 22; Bashas Opp'n 36.) For example, Mr. Lischewski wrote to Messrs. Lindberg and Capps about an April 1, 2012 price increase and forwarded to them emails from other Bumble Bee executives with competitive pricing information, (Nation Opp'n 22 (citing LION_3445-58; LION-3484; LION_12605) ), including an email chain complaining about [Redacted] by competitors, (Bashas Opp'n 36 (quoting Ex. 69) ). Lion Americas executive Chang communicated to Lion Capital general manager Lea that [Redacted]" (Nation Opp'n 22 (quoting LION_3926).) And, a slide deck prepared for the August 2012 Bumble Bee board of stated "[Redacted]," and there was an "[Redacted]." (Id. (quoting LION_4334, at 369, 374).)
Next, Mr. Lischewski had longstanding relationships with industry competitors and reported information from those meetings to the Lion entities. (Id. at 23 (citing, e.g., LION_4307).) Mssrs. Lindberg, Smialek, and others from Lion attended industry conferences and corresponded with competitors. (Id. (citing, e.g., LION_6953).) The Bashas Plaintiffs argue that the conspiracy was U.S.-centric; for example, in 2008 Lischewski told Dongwon's CEO that ninety percent of Bumble Bee's sales came from the United States. (Bashas Opp'n 35 (citing Ex. 62; Ex 63, at 875-76).)
c. Court's Analysis
Here, the uncontroverted factual allegations and the record supports Plaintiffs' contention that Lion Capital expressly aimed anticompetitive behavior at the relevant forum, the United States. Before Lion
Mr. Lea continued to communicate with Lion Americas executives concerning Bumble Bee. (LION_1575 (merger and acquisition information); LION_2529 (receiving information on Lindberg's meetings in Bangkok); LION_4714, at 22 (discussing meeting with Lyndon).) On July 30, 2012, Mr. Lindberg sent an email to Mr. Lea in which the former stated:
[Redacted]
(LION_547.) The reference to StarKist being in "[Redacted]" with Bumble Bee and "[Redacted]" suggests an agreement by Lion Capital to set prices in coordination with Dongwon. Mr. Lea also received information concerning Bumble Bee's 2012 financial results including an increase in net sales following "the price increases implemented through [2012]." (LION_12617.) At oral argument, Defendants argued that the express aiming needs to be tortious and suggested none of the conduct business-related conduct elucidated by Plaintiffs was tortious. (ECF No. 1321, at 55) This reasoning depends, in part, on the Court's determinations with regard to liability, i.e., whether Plaintiffs state a federal antitrust claim. If the Court finds the allegations sufficient to state a claim, then the same business activities support an express aiming. Plaintiffs have the burden of establishing express aiming. As will be seen below, the Court has determined that Plaintiffs state a claim for which relief can be granted as to the same conduct at issue here for express aiming. See infra section V. Accordingly, the same acts involving Lion Capital partners, discussed below, which support an antitrust violation likewise support a finding of express aiming of anticompetitive behavior.
Like the defendants in Western States, Lion Capital executives and partners were involved in the direction and control of Bumble Bee during the relevant period of the conspiracy. They received information from their Lion Americas counterparts and communicated with Lion Americas about the alleged conspiracy. Some members
3. Foreseeable Harm
As the Supreme Court made clear in Walden v. Fiore , something more is required than "imposition of an injury ... to be suffered by the plaintiff while she is residing in the forum state."
The Ninth Circuit has stated "[o]ur case law does not require that the 'brunt' of the harm be suffered in the forum state; as long as 'a jurisdictionally sufficient amount of harm is suffered in the forum state, it does not matter that even more harm might have been suffered in another state." W. States ,
C. Arises Out of Forum Related Activities
A court determines whether a claim arises out of defendant's forum-related activities in terms of "but for" causation. Unocal ,
Defendants argue that Plaintiffs do not allege any activity without which Plaintiffs' claim would not have arisen. (MTD 21.) Instead, the conspiracy existed before any Lion entity purchased Bumble Bee and Plaintiffs' allegations only speak to receiving information about the conspiracy, receiving profits from the conspiracy, and Lion's purported guilt by association. (Id. ) Defendants conclude by arguing that Plaintiffs fail to allege a harm of which a Lion entity was a but for cause. (Id. )
Plaintiffs allege that they paid artificially high prices because of a conspiracy in the packaged seafood industry. (Bashas Compl. ¶ 324; Nation FAC ¶ 250.) The only question in dispute is whether those artificially high prices were the result of Defendants' forum-related activities. Plaintiffs put forward evidence supporting affirmative actions taken by Defendants Lion Americas and Lion Capital to further the conspiracy in their oversight of Bumble Bee, a California and U.S.-based company. See supra section II.E.2; infra section V. Accordingly, the Court finds Plaintiffs' claim arise out of Defendants' forum related activities.
D. Fair Play and Substantial Justice
For a court to exercise personal jurisdiction, whether general or specific, over a defendant, such assertion of jurisdiction must be "reasonable." Amoco Egypt Oil Co. v. Leonis Navigation Co. ,
Defendants contend the exercise of jurisdiction over them is unreasonable because it would plunge Lion Capital into a large American antitrust litigation to which the Lion entities have only a tenuous connection. (MTD 22.) Further, involvement in the case would place a severe burden on Lion Capital because its employees would be forced to travel from the United Kingdom to Southern California to participate in the litigation. (Id. (citing Asahi ,
Plaintiffs counter that Defendants have inserted themselves into California's affairs by owning a San Diego-based company. (Bashas Opp'n 40.) They further contend that the majority of relevant witnesses and documents reside in California and there "is little to no burden on either Lion entity to defend itself in California." (Id. ) Plaintiffs also point out that Defendants do not argue that the remaining reasonableness factors militate against personal jurisdiction. (Id. at 41.) Plaintiffs conclude that personal jurisdiction is reasonable based on California's interest in enforcing antitrust laws, the interest of Plaintiffs in adjudicating the dispute where they were harmed, the importance of Bumble Bee to the local economy, and that any alternative forum would not provide effective relief for Plaintiffs. (See
Unlike Asahi , where the Supreme Court determined California had only a slight interest in adjudicating an indemnification claim, see
III. Imputing Personal Jurisdiction to Big Catch
Having determined that Lion Americas and Lion Capital are properly within the Court's personal jurisdiction, the remaining personal jurisdiction issue is Big Catch. In addressing this issue, Plaintiffs maintain Big Catch is subject to personal jurisdiction because Big Catch is the alter ego of Bumble Bee. (Bashas Opp'n 33; DPP Opp'n 20.) The DPP Plaintiffs also submit that Big Catch is the alter ego of Lion Capital
A. Whether Bumble Bee or Lion Capital's Contacts Impute to Big Catch
This Court has general personal jurisdiction over Bumble Bee because its principal place of business is in the United States, specifically San Diego, California, and is incorporated in Delaware. (Nation FAC ¶ 34; Bashas Compl. ¶ 19.) Additionally, the Court has determined that it has specific personal jurisdiction over Lion Capital. Plaintiffs advance several arguments why those respective contacts should impute to Big Catch.
1. Plaintiffs' Argument
The Cherokee Nation contends that Big Catch has systematic and continuous contacts
The Bashas Plaintiffs assert that Big Catch is a shell company and because shell companies are disregarded for purposes of personal jurisdiction
The DPP Plaintiffs maintain that both Big Catch and Lion Capital are the alter egos of Bumble Bee. The DPP Plaintiffs advance three general arguments to demonstrate unity of interest between Bumble Bee and Big Catch. First, Big Catch was established by Lion Capital for the purpose of purchasing Bumble Bee and has no presence outside of Lion and Bumble Bee. (Id. at 20 (citing Third Am. Consolidated Compl. ("TACC"), ECF No. 911, ¶ 45).) To that end, Big Catch does not have any employees of its own and does not engage in any business operations separate from Lion Capital and Bumble Bee. (Id. (citing TACC ¶ 37).) Second, Plaintiffs maintain that Bumble Bee and Lion executives make decisions for Big Catch and the only business Big Catch conducts is during Bumble Bee board meetings. (See
2. Defendants' Reply
Defendants do not address Plaintiffs' alter ego argument until their Reply brief to the Four Track Plaintiffs. (See Four Track Reply 20-21; see also MTD 24-30; Four Track MTD 18-19; Reply 19-25.) Defendants refute the unity of interest argument by citing the proposition that a holding company is not presumed to be an alter ego of its subsidiary because it does not conduct independent business. (Four Track Reply 20 (citing Corcoran ,
3. Court's Analysis
Big Catch is a holding company that ultimately owns Bumble Bee through various corporate subsidiaries. (Brown Decl. ¶¶ 20, 23.) Bumble Bee and Big Catch are separate legal entities. Therefore, Plaintiffs must demonstrate that Bumble Bee's contacts impute to Big Catch. The law is clear that the general personal jurisdiction of a subsidiary entity cannot be imputed to a parent entity under an agency theory. Daimler ,
Similarly, for purposes of imputing specific jurisdiction, plaintiffs must demonstrate an alter ego relationship between Bumble Bee and Big Catch. See Williams ,
Turning to the familiar alter ego test, the Court agrees with Defendants that the citizenship of Big Catch's shareholders does not demonstrate unity of interest. Generally, the presence or citizenship of a limited partner, without more, is insufficient to confer personal jurisdiction over the limited partnership. See
The Court also agrees that establishing a compensation structure that awards shares of a company, without more, is a normal business practice. Likewise, the Court is unconvinced by the Bashas Plaintiffs' argument that a complex corporate structure somehow demonstrates unity of interest. Again, establishing investment funds and using shell companies to purchase other entities, without more, is a normal business practice. But, Lion Capital's use of Big Catch after its creation raises questions about its independent corporate status.
"Generally, alter ego liability is reserved for the parent-subsidiary relationship. However, under the single-enterprise rule, liability can be found between sister companies." Las Palmas Assocs. v. Las Palmas Ctr. Assocs. ,
Applying that formulation of unity of interest here, Big Catch was organized by Lion Capital for the purpose of purchasing and holding Bumble Bee's shares. (See, e.g. , Ex. 44, ECF No. 1246-33, at 5 (Bumble Bee corporate representative deposition).) As Mr. Brown has declared, Big Catch does not hold its own board meetings,
Monje v. Spin Master Inc. , No. CV-09-1713-PHX-GMS,
The facts here are similar to the facts in Kayne v. Ho , No. LA CV09-6816 JAK (CWx),
b. Fraud or Injustice
"[I]t would be unjust to permit those who control companies to treat them as a single or unitary enterprise and then assert their corporate separateness in order to commit frauds and other misdeeds with impunity." Las Palmas,
The DPP Plaintiffs allege that Lion created Big Catch for the purpose of "provid[ing] a tax efficient structure for acquisition." (TACC ¶ 43.) The complaint goes on to allege that Big Catch was set up to transfer Bumble Bee's operating profits out of Bumble Bee. (Id. ¶ 45: see also Bashas Compl. ¶ 272 ("[Redacted]....").) The Bashas Plaintiffs allege that [Redacted]. (See Bashas Compl. ¶ 316.)
The DPP Plaintiffs also argue that further inequity is evidenced by the criminal guilty plea entered by Bumble Bee in the Northern District. The DOJ Sentencing Memorandum imposes an additional fine
Defendants maintain that Plaintiffs do not allege facts to support the conclusory allegations. (MTD 29.) Thus, according to Defendants, Plaintiffs do not allege that Lion Capital ever collected the annual payment and admit that the payment was waived for some periods. (Id. (citing Bashas Compl. ¶ 297 n.12).) Defendants respond to the criminal guilty plea argument by stating that Bumble Bee's sale is hypothetical and Big Catch is not a defendant in any criminal proceedings. (Reply 22.)
The Court begins by noting that establishing a tax efficient structure to acquire a company is a routine business practice and does not establish inequity. Furthermore, Plaintiffs have not connected the annual EBITDA monitoring fees to Big Catch; instead, it appears that Lion Capital received the fees from Bumble Bee and there are no allegations connecting the fees to Big Catch. More persuasive, however, are the allegations concerning Bumble Bee's criminal fine. Plaintiffs allege the Sentencing Guidelines range was between $136.2 million and $272.4 million. (TACC ¶ 40.) Because Bumble Bee was unable to pay the full Guidelines penalty, the parties agreed that Bumble Bee would pay a $25 million fine and Big Catch guaranteed a fine of up to $81.5 million if Bumble Bee is sold, subject to undisclosed terms and conditions. (Id. ; see also Stein Decl., Ex. 10, at 14-17.) While Defendants are correct that such a sale has not occurred to date, the motivating concern behind the fine guarantee was "to prevent an unjust outcome whereby Bumble Bee receives a reduction in its criminal fine due to its inability to pay and then shortly thereafter is sold, thereby eliminating the inability to pay." (Stein Decl., Ex. 10, at 18.) The DOJ Sentencing Memorandum went on to elaborate, "[b]y having Big Catch pay any additional fine, the government is essentially making a claim to a portion of the proceeds of a qualifying sale of Bumble Bee and ensuring that such a payment would be made before any distribution of the proceeds of the sale to investors." (Id. )
The government's claim to the proceeds of the sale ultimately depends on Bumble Bee's admission to participation in a criminal price fixing conspiracy. The investors, who would ostensibly reap the windfall of a sale, are Lion Capital's fund investors. Thus, there is a direct connection between preventing Lion Capital's investors from profiting from the price fixing conspiracy. And, Big Catch is the vehicle by which the government is preventing an injustice from occurring. This is sufficient for alleging an unjust result because as this Court has previously held, "at this early stage of litigation Plaintiffs need not prove that [Big Catch] was in fact [Lion Capital's] alter ego; instead, Plaintiffs here only need to plausibly allege that an inequitable result will follow if the corporate form is not discarded." (ECF No. 492, at 29.) The Court finds that Big Catch is the alter ego of Lion Capital and because Lion Capital is subject to Court's specific jurisdiction then the Lion Capital's contacts impute to Big Catch.
B. Fair Play and Substantial Justice
The Court's finding that Lion Capital's contacts impute to Big Catch must still comport with fair play and substantial justice, i.e., that it would be reasonable to assert jurisdiction. Big Catch has no independent status outside of Lion Capital; it
In sum, the Court finds that Big Catch is subject to the Court's personal jurisdiction through Lion Capital's specific jurisdiction contacts. Therefore, the Court does not reach various arguments advanced by Plaintiffs, including Big Catch consented to personal jurisdiction and Big Catch purposefully availed itself of the forum. The Court DENIES Defendants' Rule 12(b)(2) Motions to Dismiss with respect to Big Catch Cayman LP.
IV. Indirect Purchaser State Law Claims
The Lion Defendants move separately to dismiss the majority of the state law claims brought by the indirect purchaser tracks-the EPPs and CFPs (or "Indirect Plaintiffs")-for lack of personal jurisdiction over certain state law claims. The Court addresses the Indirect Plaintiffs' state law claims separately because the issues are unique to the indirect purchasers.
A. Defendants' Arguments
Defendants argue that the Supreme Court's decision in Bristol-Myers Squibb v. Superior Court , --- U.S. ----,
Defendants assert the foregoing analysis applies to the Indirect Plaintiffs who are not California residents, are bringing claims under the state law where they reside, and assert the harm occurred in states outside of California. (Id. at 24.) Defendants argue that claims brought under California law fail the traditional purposeful direction test for the same reasons discussed in its moving papers as to the Bashas Plaintiffs and the Cherokee Nation. (See id. at 24-25.)
Next, Defendants argue that this case's status as an MDL does not save the Indirect Plaintiffs' claims. The general rule is that "[i]n an MDL proceeding, the MDL transferee court has jurisdiction over cases transferred under
Finally, Defendants address the California Cartwright Act claims. They posit that even if there were personal jurisdiction over the California-law claims of the indirect purchaser California residents, there is no jurisdiction to bring Cartwright Act claims on behalf of non-California residents. (Id. at 28.) Defendants cite a leading treatise that stated, "[t]he Supreme Court's recent cases point to the conclusion that neither general nor specific jurisdiction exists over nationwide class suits except in the defendant's home states." (Id. (quoting 2 Newberg on Class Actions , § 6.26 (5th ed. 2018) ).) Accordingly, Defendants argue that the California residents cannot sponsor the nonresident indirect purchaser claims from other states. (See id. at 29.)
B. Indirect Plaintiffs' Arguments
The Indirect Plaintiffs respond that personal jurisdiction exists over the Cartwright Act and other state law claims.
Next, the Indirect Plaintiffs contend that because the Court should find specific jurisdiction over Lion Capital and Big Catch for the Cartwright Act claims, Plaintiffs may bring their remaining state law claims under two different theories. First, Federal Rule of Civil Procedure 18(a) allows a party to join independent or alternative claims against an opposing party. (Id. at 22.) Second, this Court can exercise pendent personal jurisdiction over any remaining claims that arise out of the same common nucleus of operative facts as the claim for which jurisdiction exists. (Id. at 22-23 (citing Picot ,
Finally, the Indirect Plaintiffs contend that Bristol-Myers does not alter a finding of personal jurisdiction here. They assert that there is a sufficient affiliation between the forum and the underlying controversy because of the specific acts of alleged conspiratorial conduct took place in California. (See id. at 25.) The Indirect Plaintiffs then cite three district court opinions that determined Bristol-Myers does not apply to federal class actions. (See id. at 26 (citing, e.g., Fitzhenry-Russell v. Dr. Pepper Snapple Grp., Inc. , No. 17-cv-
C. Defendants' Reply
Defendants first rebut Plaintiffs' claim that Bristol-Myers is distinguishable because
Next, Defendants contend that even if the Court were to consider only the named plaintiffs, those plaintiffs cannot allege any connection between their purchases and the Lion entities' activities in California. (See id. at 25-26.) Defendants then rebut Plaintiffs' Rule 18 argument by stating that personal jurisdiction must be satisfied before any claim is joined under Rule 18. (Id. at 26 (citing Allied Prof'ls Ins. Co. v. Harmon , No. 16-cv-1864-JLS-KESx,
Then, Defendants turn to the Cartwright Act claims. They argue that the cases cited by the Indirect Plaintiffs relate to choice-of-law due process principles, but Defendants are relying on specific personal jurisdiction due process principles. (Id. at 27.) They contend the nonresident Indirect Plaintiffs cannot establish specific personal jurisdiction in light of Bristol-Myers . (See id. at 29.)
D. Court's Analysis
In the wake of the Supreme Court's opinion in Bristol-Myers , district courts are divided over how far to apply its holding and reasoning. Does Bristol-Myers apply to federal courts hearing federal class action claims? Does it overrule, sub silentio , the doctrine of pendent personal jurisdiction? These are open questions and the Court treads carefully.
But first the obvious. Plaintiffs argue that the multi-state Cartwright Act class satisfies due process and cite this Court's prior order as well as several other court opinions in support of that proposition. Every single case they cite deals with choice-of-law analysis. For example, this Court's prior order determined that the Ninth's Circuit's analysis in Mazza v. American Honda Motor Co. ,
Turning to the difficult questions. In the aftermath of Bristol-Myers , several courts have determined that its reasoning applies to federal courts sitting in diversity jurisdiction because a court must apply the state personal jurisdiction statute, as well as considering constitutional limits. See Fitzhenry-Russell ,
Federal courts, sitting in diversity, apply the forum state's personal jurisdiction law. See Picot ,
Even if the Court were to apply Bristol-Myers to the Indirect Plaintiffs' state law claims, the doctrine of pendent personal jurisdiction would provide an independent basis to find personal jurisdiction. "[A] court may assert pendent personal jurisdiction over a defendant with respect to a claim for which there is no independent basis of personal jurisdiction so long as it arises out of a common nucleus of operative facts with a claim in the same suit over which the court does have personal jurisdiction." Action Embroidery ,
Pendent personal jurisdiction is appropriate here. The Court has before it federal
Defendants contend that the doctrine of pendent personal jurisdiction cannot survive Bristol-Myers and cite Greene ,
The Court also finds that even though the Indirect Plaintiffs themselves do not bring a federal question cause of action, pendent personal jurisdiction is appropriate because the other Plaintiffs allege federal causes of action. The Sloan court addressed the same issue and reasoned that Action Embroidery "focused on whether the new claims arose out of the same nucleus of operative facts, not whether the claims belonged to the same plaintiffs."
Exercising pendent personal jurisdiction also comports with fair play and substantial justice. See Axiom Foods ,
Plaintiffs bring a cause of action under section one of the Sherman Act. (See, e.g. , Bashas Compl. ¶ 322; Nation FAC ¶ 248.) Defendants advance two broad theses why Plaintiffs fail to state a claim. First, they contend that Plaintiffs fail to state a claim against the Lion entities under an alter ego theory. (MTD 24.) Second, Defendants assert that Plaintiffs fail to state a claim that Defendants are direct participants in the alleged conspiracy. (Id. at 30.)
The parties' arguments with regard to alter ego liability are coextensive with the personal jurisdiction alter ego arguments. Therefore, the Court's prior findings apply with equal weight here. The Court finds no alter ego liability between Bumble Bee and any Lion entity. The Court finds that Plaintiffs have sufficiently alleged that Big Catch is the alter ego of Lion Capital. With that in mind, the Court turns to the alleged direct participation in the conspiracy.
A. Defendants' Arguments
Defendants posit three broad arguments why Plaintiffs fail to state a claim. First, Plaintiffs' theory is implausible and makes no economic sense. (MTD 30.) Second, the allegations concerning actions taken by non-Lion defendants do not support direct participation by Lion Defendants. (Id. at 31.) Third, the allegations concerning actions taken by Lion Defendants themselves do not show direct and independent participation in the alleged conspiracy. (Id. at 32.)
1. Economic Sense
Plaintiffs' assert that Defendants uncovered the alleged price fixing conspiracy during due diligence for the Bumble Bee acquisition and then proceeded to direct a Lion investment fund to purchase Bumble Bee for the purposes of realizing supra-competitive profits from Bumble Bee's business. (Id. at 30 (citing Bashas Compl. ¶ 279).) Defendants argue this theory is implausible; specifically, it would make no economic sense for a private equity firm to risk its reputation so that one of its portfolio companies could earn profits from an illegal conspiracy. (Id. ) According to Defendants, Plaintiffs fail to allege the Lion entities have "any rational motive to join the alleged conspiracy" or that "the conduct alleged 'was consistent with the [Lion Entities'] independent interest.' " (Id. at 31 (quoting Cascades Comput. Innovation LLC v. RPX Corp. , No. 12-CV-01143 YGR,
2. Actions Concerning Non-Lion Actors
Plaintiffs also allege actions taken by non-Lion, i.e., Bumble Bee, actors. As an initial matter, Defendants take issue with Plaintiffs' group pleading, i.e., Plaintiffs' allegations are directed towards "Lion" rather than discrete entities. Defendants argue Plaintiffs fail to provide any Lion entity with fair notice of the discrete acts by which each one participated in the conspiracy. (Id. ) Turning to the substance of Plaintiffs' arguments, Defendants contend that most of Plaintiffs' factual allegations do not involve Lion entities or only involve communications that Lion executives passively received from Bumble Bee. (Id. ) For example, several phone calls and meetings that Plaintiffs allege showing a conspiracy involving Bumble Bee executives and StarKist and Chicken of the Sea executives do not include Lion executives. (Id. at 31-32 (citing Bashas Compl. ¶¶ 292, 294-95).)
Many allegations center on actions taken by a non-Lion actor, Mr. Lischewski, towards Lion employees. For example, on a January 16, 2012 phone call Lischewski conveyed to Chang what Lischewski believed to be a non-public price change by
3. Actions Concerning Lion Actors
Finally, Defendants assert that Plaintiffs fail to allege sufficient facts that Lion directly and independently participated in the conspiracy. They characterize the facts presented by Plaintiffs in support of their theory as four meetings and two emails-Defendants contend these four meetings
4. Arguments Specific to the Cherokee Nation's First Amended Complaint
The Cherokee Nation generally covers the same ground as the Bashas Plaintiffs except as to a few different facts demonstrating direct involvement. The Nation describes an email exchange between Lindberg and Chansiri where Lindberg sent Chansiri Bumble Bee's "strategic plan forecast and recent historical results" without "a formal [non-disclosure agreement]"; yet, despite the lack of a non-disclosure agreement, Lindberg made clear that the information was "very confidential." (ECF No. 1006-1, at 36 (quoting Nation FAC ¶ 53).) Defendants characterize this exchange as consistent with Lion's desire to sell Bumble Bee to the highest bidder and the exchange does not plausibly suggest direct participation in the conspiracy. (Id. )
Next, the Cherokee Nation alleges Lischewski shared information with the Lion entities he gleaned from his "relationships throughout the industry" including an instance where he told employees of the Lion entities that "[i]nternally no one at [Chicken of the Sea] knows what [Thai Union Group's statement] means." (Id. at 34 (quoting Nation FAC ¶ 52).) Defendants argue that Plaintiff does not allege what the "statement" was or meant, what Lion employees thought about the statement, what Lischewski's report about the statement meant, or how any of this was connected to the alleged conspiracy. (See
In sum, Defendants recognize that this Court has previously held that the MDL plaintiffs have plausibly alleged the existence of a conspiracy in the packaged tuna industry, but the allegations here do not establish direct and independent participation. (MTD 35.) Instead, the allegations describe rational, legitimate business activity typical of a private equity firm. (Id. )
B. Plaintiffs' Arguments
1. Economic Sense
With regard to Defendants argument that it would make no economic sense for
2. Direct Involvement by Lion
Next, as to Lion entities' direct involvement. Plaintiffs argue that their allegations go beyond four meetings and two emails, but even those events would be sufficient to state a claim. (Id. at 23.) For example, before Lion Capital purchased Bumble Bee, Lischewski told Lindberg that a "[Redacted]" was that Lion Capital would "[Redacted]." (Id. (quoting Bashas Compl. ¶ 278).) Plaintiffs argue that they have already pled that Bumble Bee and Dongwon were conspiracy participants, making it more likely that Lischewski was referring to the conspiracy. (Id. ) And, Lischewski's recent criminal indictment charged that he "us[ed] code" to conceal the conspiracy. (Id. at 23-24 (quoting Ex. 45, at 4).)
With regard to the meetings. Plaintiffs contend they follow a similar pattern as previously alleged, whereby the conspiracy participants exchanged assurances and then their respective subsidiaries would adhere to the pricing agreements. (See
Plaintiffs return to Defendants' allegation that Lischewski thought he was relaying non-public information about StarKist's price increase to Lion Americas executives. They contend that, even though the information was public, Lischewski thought the information was private. He discussed Bumble Bee's agreed intention to implement a similar price increase and Lion accepted the information on those terms. (Id. at 26.) Finally, Plaintiffs reference the email that Lischewski sent to Lindberg and Capps about [Redacted] Plaintiff states that Defendants offer no alternative argument as to what "[Redacted]" refers to beyond an agreement to fix prices. (Id. ) Further, StarKist and Bumble Bee are already members of an adequately-pled conspiracy. According to Plaintiff, the most logical inference is that "[Redacted]" referred to the conspiracy. (Id. )
C. Defendants' Reply
First, Defendants argue, again, that Plaintiffs' theory lacks economic sense. Defendants state that Plaintiffs agree that Lion Capital's business model is to strengthen and re-sell brands so that investors can achieve superior returns. (Reply 14.) Defendants distinguish the cases Plaintiffs cite because the defendants in those cases all stood to reap the profits from their conspiracies, but here, the Lion entities are not themselves in the packaged tuna business and do not directly
Second, Defendants reiterate that Plaintiffs' allegations concerning Lindberg's meetings and communications do not support a conclusion he or any Lion entity participated in the alleged conspiracy. (Id. at 16-17.) Thus, for example, Defendants contend Plaintiffs' allegation that Lindberg telling Chansiri that [Redacted]" was code for a conspiracy is implausible. (See id. at 17.)
Third, Defendants address Plaintiffs' allegations that certain meetings and communications were for the purpose of facilitating a sale of Bumble Bee. Defendants argue that facts concerning a potential sale cannot support a price-fixing claim because they are "entirely consistent with [the Lion Entities] pursuing [their] own economic interests," and have nothing to do with packaged-tuna pricing. (Id. (alterations in original) (quoting In re Pressure Sensitive Labelstock Antitrust Litig.,
Fourth, Defendants dispute Plaintiffs' arguments concerning Mr. Lischewski's indictment and that he used "code to conceal the conspiracy." Defendants argue that the motivations Plaintiffs attribute to Dongwon, Thai Union Group, or Lischewski do not support a plausible inference that any Lion entity evinced a "conscious commitment" to a price fixing conspiracy. (Id. at 18 (quoting Greencycle Paint, Inc. v. Paintcare, Inc. , No. 15-cv-4059-MEJ,
Finally, Defendants turn to the January 26, 2012 email Mr. Lischewski sent to Lindberg and Capps. Defendants contend that by the time of this email, the April 2012 price increase was public knowledge and the inference the Court should take from the email is there was "aggressive pricing behavior in a highly competitive marketplace." (Id. )
D. Court's Analysis
Section one of the Sherman Act declares illegal "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states."
In Twombly , the Supreme Court emphasized the pleading requirements under section one of the Sherman Act:
[A] plaintiff's obligation to provide the "grounds" of his "entitle[ment] to relief" requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.... Factual allegations must be enough to raise a right to relief above the speculative level.
In applying these general standards to a § 1 claim, we hold that stating such a claim requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made. Asking for plausible grounds to infer an agreement does not impose a probability requirement at the pleading stage; it simply calls for enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of illegal agreement.... [A]n allegation of parallel conduct and a bare assertion of conspiracy will not suffice.
1. Whether Plaintiffs' Theory Makes Economic Sense
"Antitrust claims must make economic sense." Adaptive Power Sols., LLC v. Hughes Missile Sys. Co. ,
Here, Plaintiffs allege that after decades of growth, demand for packaged tuna has been falling since 2004. (Bashas Compl. ¶ 74.) The U.S. demand for tuna has decreased from an average of 3.5 pounds of canned tuna per person in 2000 to under 2.5 pounds per person in 2014. (Id. ¶ 77, fig. 2.) At the same time as the decline in consumption from 2004 to 2014, Plaintiffs allege that there was an oversupply of raw tuna. (Id. ¶¶ 78-79.) Plaintiffs conclude that an increase in supply and a decline in demand would result in a corresponding decrease in prices. Instead, prices remained constant or increased from 2004 to at least 2015. (Id. ¶ 79.)
Lion Capital purchased Bumble Bee, on behalf of its investment fund, in late 2010. The parties agree that Lion Capital's business model, as a private equity investment firm, was to strengthen and resell Bumble Bee for a profit. This profit would benefit Lion's investors through an increase in value to Lion Capital's funds, which hold a portfolio of different consumer brands.
Defendants raise valid counterarguments; most persuasive of which is their contention that the Lion entities would not risk their clients' investments
2. Direct Participation by Lion Americas
a. Conspiracy Between Two or More Persons
In Twombly , the Supreme Court distinguished between allegations resting on "descriptions of parallel conduct" and "any independent allegation[s] of actual agreement."
Here, there is no direct evidence of an agreement between Lion Americas' executives and the other members of the alleged conspiracy. Therefore, the Court examines Plaintiffs' circumstantial evidence of an anticompetitive agreement. See
If that were the extent of the allegations, this would be an easy call. However, Plaintiffs provide additional factual matter that plausibly demonstrates Lion Americas directly participated in the ongoing conspiracy. At the macro-level, the following considerations are notable. First, the ongoing DOJ inquiry: in its first order discussing direct participation in a price-fixing conspiracy, this Court noted that the ongoing DOJ inquiry "may bolster additional allegations." (ECF No. 283, at 13-14.) The Court noted the problems in "relying solely or too heavily on pending government investigations in analyzing the sufficiency of a conspiracy complaint." (Id. at 14.) As a district court in the Northern District stated, "[i]t is unknown whether the investigation will result in indictments or nothing at all.... the scope of the investigation is pure speculation. It may be broader or narrower than the allegations at issue." In re Graphics Processing Units Antitrust Litig.,
In this instance, the outcome of the investigation is not "pure speculation." Bumble Bee has pled guilty to a conspiracy to fix prices in the packaged seafood market in the United States. (Bashas Compl. ¶ 268.) Two executives at Bumble Bee have also pled guilty and Mr. Lischewski has been indicted. (See id. ¶ 4; Ex. 45, ECF No. 1247-17.) The DOJ's investigation has moved beyond the nascent stages outlined in the Court's prior order, (see ECF No. 283, at 14-15), and the Court considers those facts as part of its analysis.
Also meriting discussion, Plaintiffs describe the market dynamics and Lion's knowledge of those realities. Plaintiffs have alleged that from 2004 through 2014 domestic U.S. consumption of tuna has declined. (Bashas Compl. ¶ 76.) And, the global supply of raw tuna increased over that same time period. (Id. ¶ 78.) In a normal market this would decrease prices. However, as Plaintiffs point out, the dollar sales of packaged tuna increased while the volume of sales has decreased, which supports a conclusion that prices increased. (See id. ¶ 76 fig. 1.) Defendants had access to sales and production data from Bumble Bee and, as they admit, Lion Capital is a "sophisticated investment firm." (Reply 15.) One might expect a sophisticated investment firm to diagnose why prices remained elevated despite decreasing demand and increasing
The period from January to March 2012 is particularly salient. Plaintiffs discuss a specific telephone conversation on January 16, 2012, where Lischewski thought he was giving Mr. Chang StarKist's non-public price list information. (Bashas Compl. ¶ 287.) The information was already public. (Id. ) However, Plaintiffs plausibly allege that Lischewski was unaware of that fact because the day after the call, Lischewski emailed Cameron "[Redacted]," i.e., the day after the call. (Id. ¶ 287 n.10.) Plaintiffs do not allege what Chang knew or how he responded to Lischewski's information, but it is reasonable to infer that Chang had at least some context concerning the price increases. Two days later. Plaintiffs allege Lischewski forwarded to Lindberg and Capps an email exchange between Cameron and Worsham "[Redacted] (Id. ¶ 288.) Lischewski commented that Chicken of the Sea and StarKist were "[Redacted]" on first quarter pricing, but "[Redacted]." (Id. ) Defendants dismiss these allegations as concerning public information in a highly competitive marketplace. (See Reply 18.)
The word [Redacted] is of particular interest; it carries negative connotations and likely would put the reader of an email on notice that some mischief is afoot. Combining this negative word with Lischewski's corollary hope that the price increase would correct "[Redacted]," yields a reasonable inference that the price increases were not legitimate business practice. Put differently, the allegations plausibly describe an instance where StarKist was undertaking some mischief that would be corrected by a price increase. And, Worsham and Cameron allegedly complained about a discrepancy between StarKist personnel and leadership over pricing tactics, which gives further context to the cheating or mischief. Defendants are correct that Plaintiffs do not plead that Lindberg or Capps knew what the email referred to; however, Twombly does not require certitude. It only requires enough factual matter to nudge allegations from mere possibility to plausible. See Twombly,
A few weeks later, Lindberg and Chansiri corresponded via email. Plaintiffs allege asked [Redacted]. (Bashas Compl. ¶ 289.) Lindberg replied, "[Redacted]." (Id. )
Finally, on March 30, 2012, Lischewski and Lindberg corresponded via email concerning an article featuring StarKist's president and CEO, who had voiced support to increase package tuna prices. Lindberg allegedly wanted Lischewski to publicly echo those comments, which Lischewski thought unnecessary because [Redacted] (Id. ) ¶ 29 encouraged Lischewki, stating:
[Redacted]
(Id. (emphasis omitted).) This exchange suggests that there was a discrepancy between StarKist's and Bumble Bee's understanding of or interpretation of market prices and Lindberg wanted to align both sides' understanding, i.e., StarKist was crazy, Bumble Bee was rational, and Lindberg wanted both to be rational.
Defendants raise the possibility that the preceding events depict rational, legitimate business activity typical of a private equity firm. (MTD 35.) They raised similar arguments at the hearing; specifically, the discussions and emails concerned legitimate "marketing intelligence" by the Lion entities about their market competitors. (ECF No. 1321, at 52.) In its prior order, the Court noted that the "the similarity, and corresponding equipoise between innocuous and conspiratorial inferences, is partially removed by the alleged agreement and tighter timeline during which the relevant communications occurred." (ECF No. 283, at 18.) The concern between plausibility and possibility, as discussed in Twombly and Iqbal , is "largely grounded in ensuring the burdens of often costly and time-consuming discovery are taken into account when a court considers a motion to dismiss." (Id. at 17 (citing Twombly ,
b. Intent to Harm or Restrain Trade or Commerce
There are two modes of analysis to determine whether an agreement between conspirators was lawful: per se and rule of reason. Rule of reason is the default mode "unless the challenged action falls into the category of 'agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.' " Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co. ,
"In analyzing the reasonableness of an agreement under § 1, the Supreme Court has distinguished between agreements made up and down a supply chain, such as between a manufacturer and
Here, Plaintiffs have alleged an agreement amongst the dominant market competitors in the packaged tuna industry to fix prices. (See Bashas Compl ¶ 1; ECF No. 283, at 21 (finding per se violation of Sherman Act for a related allegation concerning FAD-free tuna labels).) The Court finds that Plaintiffs have sufficiently alleged a per se Sherman Act violation.
c. Antitrust Injury
The third element required to bring an antitrust claim is that a plaintiff must have suffered an antitrust injury. See Glen Holly Entm't, Inc. v. Tektronix, Inc. ,
Here, Plaintiffs allege sufficient unlawful conduct as illustrated by the purported conspiracy to fix prices amongst market competitors. As previously discussed, this is a per se violation of the Sherman Act. They allege that they have been injured by increased prices, (Bashas Compl. ¶ 223-24, 324), which were the result of Defendants' anticompetitive acts, (id. ).
Finally, with respect to the type of injury that antitrust laws were meant to protect, the Ninth Circuit has stated: "Antitrust injury requires the plaintiff to have suffered its injury in the market where competition is being restrained. Parties whose injuries, though flowing from that which makes the defendant's conduct unlawful, are experienced in another market do not suffer antitrust injury." Am. Ad Mgmt. ,
3. Direct Participation by Lion Capital and Big Catch
Finally, the Court turns to direct participation by Lion Capital and Big Catch. The Court agrees with Defendants
Further, the Complaint contains no factual matter concerning Big Catch's participation in the conspiracy, which is not surprising given its role as a holding company. Further, because Plaintiffs have not alleged sufficient facts to state a claim against Lion Capital, it does not matter that the Court has found that Big Catch is the alter ego of Lion Capital for personal jurisdiction purposes. Accordingly, the Court finds that Plaintiffs fail to state a claim with regard to Big Catch. Therefore, the Court GRANTS IN PART Defendants' Rule 12(b)(6) motions and DISMISSES WITHOUT PREJUDICE Plaintiffs' claims as to Lion Capital, LLP and Big Catch Cayman LP.
In sum, the Court finds Plaintiffs have alleged sufficient facts to plausibly state a claim for a violation of section 1 of the Sherman Act by Lion Americas. The Court DENIES IN PART Defendants' Rule 12(b)(6) Motions to Dismiss with respect to Lion Americas.
VI. Statute of Limitations
Finally, Defendants argue that a four-year limitations period applies and should limit any liability for more than four years prior to when the various causes of action accrue. (MTD 36 (citing 15 U.S.C. § 15b ; and Hexcel Corp. v. Ineos Polymers, Inc. ,
Plaintiffs argue that the statute of limitations was tolled due to Defendants' fraudulent concealment. (Bashas Opp'n 43.) Plaintiffs go on to assert that they have alleged significant factual detail demonstrating affirmative acts by various defendants to conceal the conspiracy. (See
Defendants respond by citing this Court's prior order stating "allegations of fraudulent concealment must satisfy Federal Rule of Civil Procedure 9(b)." (Reply 25 (quoting ECF No. 295, at 90).) They also cite Barker v. American Mobil Power Corp. ,
"Antitrust actions under the Clayton Act are subject to a four year statute of limitations." In re TFT-LCD (Flat Panel) Antitrust Litig. ,
Plaintiffs' allegations concerning fraudulent concealment meet Rule 9(b)'s particularity requirement with respect to Bumble Bee, StarKist, and Chicken of the Sea and their employees involved in the alleged conspiracy. The allegations include various affirmative acts, including telephonic conversations, emails from private accounts, and face-to-face meetings. (See Bashas Compl. ¶ 258.) Plaintiffs aver that they did not have knowledge of the facts giving rise to their claim and acted diligently in searching out the facts. (See id. ¶¶ 261-66.) The Court finds Plaintiffs have adequately alleged fraudulent conspiracy, at least as to some defendants but not the Lion Defendants.
This observation is only partially satisfactory because the Ninth Circuit has announced a general rule that fraudulent concealment may not be transferred or imputed from one defendant to another. See Barker ,
If [a plaintiff] can establish the existence of a conspiracy in violation of the antitrust laws and that [defendants] were a part of such a conspiracy, [defendants] will be liable for the acts of all members of the conspiracy in furtherance of the conspiracy, regardless of the nature of [defendants'] own actions. Participation by each conspirator in every detail in the execution of the conspiracy is unnecessary to establish liability, for each conspirator may be performing different tasks to bring about the desired result.
In re Animation Workers ,
CONCLUSION
In light of the foregoing, the Court GRANTS IN PART AND DENIES IN PART Defendants' Motions to Dismiss, (ECF Nos. 997, 999, 1248). The Court GRANTS Defendants' Rule 12(b)(6) Motions with regard to Lion Capital, LLC and Big Catch and DISMISSES WITHOUT PREJUDICE those claims. The Court DENIES Defendants' Rule 12(b)(6) Motions as to the claims against Lion Capital (Americas), Inc. and DENIES Defendants' Rule 12(b)(2) Motions as to all Lion Defendants. The Court GRANTS LEAVE TO AMEND the respective Complaints to all Plaintiffs. Plaintiffs MAY FILE amended Complaints within thirty (30) days of the date on which this Order is electronically docketed. Plaintiffs SHALL consolidate and coordinate filings to the maximum extent possible.
IT IS SO ORDERED.
Notes
The Lion Defendants' three motions are substantially similar. For ease of reference, all citations to Defendants' memorandum of points and authorities will be to the sealed document located at ECF No. 1005-1. However, the Court will reference Defendants' second and third motions, located at ECF No. 1006-1 and ECF No. 1254-1 to the extent those briefs diverge from the Motion against the Bashas' Plaintiffs.
These are the complaints located at ECF Nos. 894, 897, 908, 910-13, 915-16, 918, 920, 923, 925, 929, 930, 933, and 1208.
The sealed version of the Bashas Complaint is located at ECF No. 6 in No. 17-CV-2487.
The sealed version of The Cherokee Nation's First Amended Complaint is located at ECF No. 825.
Pin citations to docketed material refer to the CM/ECF page numbers electronically stamped at the top of each page.
The parties dispute whether Lion Americas' office and employees belong to or are controlled by Lion Capital. (See, e.g. , Bashas Compl. ¶ 270.)
Plaintiffs point to the Department of Justice's ("DOJ") statements with regard to an aborted attempt by Thai Union Group to purchase Bumble Bee in late 2014 and 2015. DOJ said that "the parties knew or should have known from the get go-that the [packaged seafood] market is not functioning competitively today." (Bashas Compl. ¶ 277 & n.9 (citing Dep't of Justice, Press Release No. 15-1487, Chicken of the Sea and Bumble Bee Abandon Tuna Merger After Justice Department Expresses Serious Concerns, https://www.justice.gov/opa/pr/chicken-sea-and-bumble-bee-abandon-tuna-merger-after-justice-department-expresses-serious (Dec. 3, 2015) ).)
Plaintiffs allege that Mr. Lindberg was both director of Lion Americas and a partner at Lion Capital. (Bashas Compl. ¶ 271.) The Bashas Plaintiffs also request the Court judicially notice a picture taken from Lion Capital's website as it existed on October 19, 2014, which depicts Mr. Lindberg and states he is a partner at Lion Capital. (Bashas Opp'n 13 n.5 (citing, e.g., Erickson v. Neb. Mach. Co., No. 15-cv-1147-JD,
FAD means Fish Aggregation Device. (Bashas Compl. ¶ 210.) Fish aggregation devices are a means to catch more fish and thus decrease costs. As the Plaintiffs explain, environmental groups and consumers have pushed the defendants not to use fish aggregating devices: if packaged tuna had "FAD-free" labelling then the proponent of such labelling would stand to benefit against those who do not follow suit. (See
Plaintiffs request the Court judicially notice Mr. Lischewski's indictment, (Ex. 45, ECF No. 1247-17). (Nation Opp'n 34 n.36; Bashas Opp'n 24 n.14.) Courts may take judicial notice of court dockets and filings in other courts. Porter v. Ollison ,
In advancing this theory, the Cherokee Nation aggregates two arguments together: first, that Lion Capital, by itself, has sufficient contacts to subject it to general jurisdiction; and second, that Lion Americas' contacts should be imputed to Lion Capital because the former is an alter ego of the latter. (See Nation Opp'n 28-31.) The Court addresses the first argument here and the second (alter ego) argument below, see infra section I.C. The Bashas Plaintiffs do not assert that the Court has general personal jurisdiction over either Lion Capital or Big Catch. (See Bashas Opp'n 31-43.)
A brief explanation of exhibit pin citations is relevant here. The Cherokee Nation decided not to organize their evidentiary filings into numbered exhibits, other than one single exhibit numbering more than 4,200 pages. Instead, Plaintiff cites to the individual page numbers produced during discovery. These pages start with the prefix LION_. The Court will cite these pages as the Cherokee Nation does.
Plaintiff the Cherokee Nation argues that Defendants' reliance on Daimler is "wholly inapposite." (Nation Opp'n 28 n.31.) Plaintiff attempts to distinguish Daimler as turning on whether there could be jurisdiction over a foreign defendant based on events occurring outside the United States, but the events here took place inside, and the harm occurred within, the United States. (See
Plaintiff's reading of Daimler is incorrect. The location of the events in question and the location of the harm is irrelevant for general jurisdiction. General jurisdiction arises where "the continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit ... on causes of action arising from dealings entirely distinct from those activities. " Daimler ,
Neither Lion Capital nor Big Catch is a corporation; they are a limited liability partnership and a limited partnership, respectively. (See Brown Decl. ¶¶ 3, 18.) Generally, courts apply Daimler to non-corporate business entities. See Waldman v. Palestine Liberation Org. ,
One final question remains: should the Court apply the place of organization and principal place of business paradigm to limited partnerships? Waldman did not distinguish between where the association was formed and its principal place of business and instead characterized the appropriate test as: where the defendants were "fairly regarded as at home" and answered the test as a singular location.
Mr. Brown's declaration only discusses the residency of current Lion Capital members and does not account for Lion Capital members, with U.S. domicile, who have apparently resigned from the firm before the filing of these motions. There is limited case law discussing the appropriate time period to assess general jurisdiction. "[C]ourts must examine the defendant's contacts with the forum at the time of the events underlying the dispute when determining whether they have jurisdiction." Steel v. United States ,
The Bashas Plaintiffs briefly argue that Lion Capital is the alter ego of Lion Americas and, therefore, Lion Americas' contacts should impute to Lion Capital. (Bashas Opp'n 34.) They contend, in one sentence, that "Lion Capital and Lion Americas had significant employee overlap, held themselves out as a single entity in emails and on their website, shared offices, and jointly control[led] the funds that purchased Bumble Bee." (Id. ) They make this argument only with regard to specific (not general) jurisdiction. Because the Bashas Plaintiffs' argument is duplicative of the Cherokee Nation's arguments, the Court only discusses the latter here.
While the relevant forum to measure contacts for the Clayton Act is the United States, the parties rely on California law with reference to the alter ego theories and the Court will do the same.
The individuals cited are Lion Americas' employees: Jeff Chang, Eric Lindberg, and Jacob Capps, Kelly Patrick Mayer, and Rory O'Connor. (See Nation Opp'n 14-15.) Plaintiff submits evidence that these Lion Americas' executives were also Lion Capital members. (Id. at 14 (citing, e.g., LION_5919; LION_14310, at 316).) These executives had Lion Capital email addresses and corresponded to third-party entities "on behalf of Lion Capital." (Id. at 28 (quoting LION_4213).)
Defendants do not address the Lion Americas/Lion Capital alter ego argument in their Bashas/Cherokee Nation moving papers. Instead, they rebut the arguments in the Four Track Reply brief.
However, it does appear that Lion Capital did compensate a few Lion Americas employees who also received distributions for their status as Lion Capital partners. The Court addresses those contacts below. See infra section II.D.
Big Catch ultimately holds Bumble Bee's assets and a limited holding company-Lion/Big Catch Ltd.-controls Big Catch. (Brown Decl. ¶¶ 20, 23.) Lion Capital is not one of the sixty-seven owners of Big Catch stock. (LION_14788, at 845-915, 937-42.) It appears that Lion/Latimer GP II (Guernsey) Ltd. is the general partner of Lion/Big Catch Ltd. (LION_14788, at 917.) In turn, the Lion/Latimer GP II fund is a related party to a third party entity, Lion Capital General Partnership LLP. (Ex. 54, at 11.) Lion Capital General Partnership LLP's designated members are the same as Lion Capital-Lyndon Lea and Robert Darwent. (Id. at 4.)
These projects are: (1) Lion executives "facilitated and helped oversee" a co-packing venture with Chicken of the Sea; (2) executives advised Bumble Bee on public relations issues concerning fish aggregating devices; (3) executives "communicated" on Bumble Bee's behalf regarding sustainability issues; and (4) "assisted" with "rolling out" Bumble Bee's frozen food products. (Bashas Compl. ¶ 314.)
Both the Cherokee Nation and the Bashas Plaintiffs cite Slottow v. American Casualty Co. of Reading, Pennsylvania ,
Federal courts apply the law of the forum state to determine whether an entity is the alter ego of an individual. Hickey ,
The rule in California appears to be: inadequate capitalization is an important factor and, where it appears, an important one. See Enter. Tech. Holdings, Inc. v. Noveon Sys., Inc. , No. 05-CV-
Finding that the actions taken by partners of Lion Capital impute to the partnership for purposes of specific jurisdiction does not run afoul of the Supreme Court's holding in Daimler , which dealt with general jurisdiction over wholly owned subsidiaries. See
At oral argument, the Bashas Plaintiffs argued that Big Catch borrowed $145 million against Bumble Bee's assets to distribute to its shareholders. (See ECF No. 1321, at 41; Bashas Opp'n 15.) This fact is not persuasive for two reasons. First, it appears that Lion Capital and Bumble Bee were the entities responsible for intentionally acting. (See Bashas Opp'n 15.) Second, the Bashas Plaintiffs do not connect the borrowing of additional funds to the price-fixing conspiracy.
Plaintiffs contend Mr. Lea attended board meetings in California. (See Nation Opp'n 22 (citing LION_4334).) The evidence supporting this inference is that his name appears on slide deck as an attendee at board meetings. Yet, emails sent after the meetings suggest Mr. Lea was not present, but received information. (See LION_3926; LION_12618.) The Supreme Court has stated that physical presence in the forum is not dispositive as long as "a commercial actor's effects are 'purposefully directed' toward residents of another state." Burger King ,
The DPP Plaintiffs' alter ego arguments are located in the section of their brief pertaining to Rule 12(b)(6), (see DPP Opp'n 20-22), but later in their Opposition brief they contend the alter ego analysis is a basis for general jurisdiction, (see id. at 30-31). Therefore the Court addresses the alter ego argument here.
Plaintiffs' moving papers are not particularly clear as to what theory supports their argument. At oral argument, the Bashas Plaintiffs clarified that that their theory rested on Howard and Transamerica , both of which relied on an alter ego theory. See infra section III.A.3. Therefore, the Court considers Plaintiffs' arguments as attempting to make out an alter ego theory.
The Williams court did, however, apply the agency test for specific jurisdiction, in the alternative. See
Where a holding company is nothing more than an investment mechanism[, i.e.,] a device for diversifying risk through corporate acquisitions[,] the subsidiaries conduct business not as its agents but as its investments. The business of the parent is the business of investment, and that business is carried out entirely at the parent level.
Unocal ,
They also argue that specific jurisdiction exists based on purposeful direction and alter ego theories, which the Court has already discussed at great length. See supra sections I & II.
The Cherokee Nation FAC only alleges two meetings: October 2011 and early 2012. (ECF No. 1006-1, at 35 (citing Nation FAC ¶¶ 52-53).) Defendants advance the same argument with respect to the Bashas Plaintiffs: these facts could just as easily suggest rational, legal behavior. (See id. ) Because the Bashas Plaintiffs' allegations are the broadest concerning the meetings, the Court will only address the Bashas' arguments above the line.
At oral argument, Defendants emphasized that Lion Capital's investors contributed at least $300 million into the purchase of Bumble Bee. According to Defendants, that investment, in addition to potential civil and criminal fines, demonstrates the Lion investors would be on the hook for potential losses if the conspiracy were discovered. Further, Lion Capital knew it was going to sell Bumble Bee, which would trigger an antitrust review by the DOJ. The Court agrees that Defendants arguments are plausible; however. Plaintiffs' theory is also plausible. Plaintiffs do not have to allege a probability requirement, only that their theory is plausible.
At oral argument, Defendants acknowledge that Lion Capital is a sophisticated investment firm, but contend that a conspiracy agreement would not be discovered by a due diligence of the internal documents from Centre Partners Management. (ECF No. 1321, at 51.) The Court understands Defendants' argument; however, the market conditions are generally observable when a firm, such as Lion, conducts "marketing intelligence" on the other competitors in the market. (Id. at 52.) Thus, as the DOJ stated, "the parties knew or should have known from the get go-that the market is not functioning competitively today, and further consolidation would only make things worse." (Bashas Compl. ¶ 84.)
The Court omits a bracket from this sentence that Plaintiffs inserted in their Complaint: [i.e., deviations from the conspiracy pricing]. (Bashas Compl. ¶ 289.) This is a conclusory allegation and is not credited.
The Cherokee Nation's antitrust injury is the subject of a different motion to dismiss and will be discussed separately by the Court.
The Bashas Plaintiffs argued at the hearing: "The same [employees] that worked for both companies were executives at both companies, and the actions taken by these individuals in furtherance of the conspiracy as alleged below were taken on behalf of both entities." (ECF No. 1321, at 46.) While Plaintiffs allege "significant overlap" between Lion Americas and Lion Capital, (Bashas Compl. ¶ 271), they do not provide the Court with any argument why the actions of a limited partner should impute to the limited partnership or why the Court should determine Lindberg, Capps, and Chang were working for Lion Capital at the same time they were working for Lion Americas.