The United States Court of Appeals for the Eighth Circuit has decided that arbitration agreements are not necessarily the silver bullet that will dispose of antitrust claims five retail groceries (the “Retailers”) are asserting against two of the largest wholesale grocers in the United States – SuperValu Inc. and C&S Wholesale Grocers Inc. (the “Wholesalers”).

While the Eighth Circuit reversed the ruling of the U.S. District Court for the District of Minnesota in In re: Wholesale Grocery Products Antitrust Litigation that the doctrine of “equitable estoppel” makes the arbitration agreements a bar to the Retailers’ claims against the “Wholesalers,” the appellate court remanded the claims to the lower court to decide if the arbitration agreements might still bar those claims under a successor-in-interest theory.

The Retailers accuse the Wholesalers of inflating prices through an asset exchange agreement, under which they agreed not to compete for customers already under supply and arbitration agreements at the time of the exchange.

While each Retailer had an arbitration agreement with one of the Wholesalers, each Retailer only sued the Wholesaler with which it did not have an arbitration agreement.  The district court dismissed the Retailers’ claims, finding that they were equitably estopped from refusing arbitration because their claims were so intertwined with the arbitration agreements.

However, the Eighth Circuit ruled that equitable estoppel does not apply because the alleged antitrust violations were not sufficiently related to the contracts with the arbitration clauses.  The court found that the Retailers’ antitrust conspiracy claims “exist independent of the supply and arbitration agreements.”  The court also noted that “the Retailers’ antitrust claims are premised on paying artificially inflated prices, but since none of the Retailers’ contracts with the Wholesalers specify price terms, the Retailers’ claims do not involve alleged violation of any terms of those contracts.”

Judge Duane Benton dissented from the decision, arguing that the majority had misread the arbitration agreements.  According to the dissent, the Retailers’ antitrust claims were coved by the arbitration clauses, which required arbitration for “any dispute arising between the parties,” not just disputes related to the supply agreement.

Although the Eighth Circuit reversed the dismissal of the Retailers’ claims, that court left open the question of whether the district court on remand should compel arbitration on a successor-in-interest theory.  Such a theory would make the Retailers’ subject to the arbitration agreements because the Wholesalers essentially inherited each other’s arbitration agreements.  That theory will now be decided by the district court on remand.

On remand, the fate of the Retailers’ claims will be especially uncertain given the district court’s prior rulings.  After dismissing the Retailers’ claims, the district court denied class certification to the remaining plaintiffs, and subsequently granted summary judgment on the remaining plaintiffs’ antitrust claims.  The lower court found that the antitrust claims were not viable because the Wholesalers’ price increases stemmed not from an antitrust violation, but from contract violations that occurred after the Wholesalers swapped facilities.  Both of these orders are being appealed to the Eighth Circuit.

Claims by retail grocers that two of the largest grocery wholesalers in the United States violated the antitrust laws by market allocation have hit a dead end in the case of In re Wholesale Grocery Products Antitrust Litigation in the U.S. District Court for the District of Minnesota.

The court has granted defendants SuperValu, Inc. and C&S Wholesaler Grocers, Inc. summary judgment on the claims of plaintiffs Deluca’s Market Corp. and D&G, Inc., two retail grocers, that defendants violated the Sherman Act by allocating territories and customers through an Asset Exchange Agreement.

In 2003 C&S purchased the grocery operations and distribution centers of Fleming Companies, a competing wholesaler that had filed for bankruptcy earlier that year.  A Vermont corporation with headquarters in Keene, New Hampshire, C&S had concentrated its business in the Northeast, and decided to sell the Flemings operations located in the Midwest to SuperValu.  In return, SuperValu, whose business operations are centered in Minnesota, gave its distribution centers and operations in the Northeast to C&S.

Plaintiffs argued the asset exchange agreement was a per se violation of antitrust laws.  As part of the agreement, the two wholesalers did not compete for customers previously serviced by Flemings.

However, Judge Ann D. Montgomery disagreed.  The court held that since the agreement did not prohibit SuperValu and C&S form competing for customers not covered by the agreement, it did not make an “exclusive market allocation,” and thus should not be treated as per se illegal.

Applying a rule of reason analysis, the court held that plaintiffs failed to produce sufficient evidence of an unreasonable restraint of trade.  Not only were there were other wholesalers competing against the defendants, but neither SuperValu nor C&S ever gained a dominant share of the market.

Deluca and D&G were the last plaintiffs remaining after class action certification was denied in July.

Finding pricing issues too variable for common treatment, a federal court has denied grocery stores’ motion for class certification of their customer allocation claims against wholesale retailers SUPERVALU and C&S.

The plaintiffs in the In re: Wholesale Grocery Products Antitrust Litigation are retail grocers who allege that defendants SUPERVALU and C&S – two of the largest grocery product wholesalers in the U.S. – conspired to allocate territory and customers through an Asset Exchange Agreement.  The plaintiffs had asked the U.S. District Court for the District of Minnesota to certify two classes of retail grocers, in New England and the Midwest.

Throughout the 1990s and early 2000s, SUPERVALU’s wholesale business was mainly located in the Midwest but began expanding into New England.  A threatened C&S, whose market was mainly in New England, was forced to expand into states such as Ohio and Wisconsin.

In 2003, the two companies signed the Asset Exchange Agreement, pursuant to which SUPERVALU took over C&S locations in the Midwest, and C&S took over SUPERVALU’s distribution centers in New England.

Grocery stores in 13 different states claim that the effect of the SUPERVALU and C&S Asset Exchange Agreement was to implement an allocation of territories and customers that was anticompetitive in light of the bankruptcy of a third competitor, Fleming Companies, Inc.  

Judge Ann D. Montgomery denied the class certification motion, finding that plaintiffs had failed to show that common issues predominated with respect to impact. 

The court noted that the plaintiffs’ attempt to show common impact through imposition of supracompetitive prices was complicated by the fact that “prices vary by customer.”

Although the grocery stores’ evidence showed prices were higher, that evidence also indicated that price varies based on many factors, such as the distance between a SUPERVALU or C&S distribution center and each grocery store.

“Plaintiffs merely assume that C&S did in fact raise prices in response to the absence of SuperValu as a competitor,” wrote Judge Montgomery.  The court summed up by noting that “all evidence of record suggests that the nature of the wholesale grocery pricing is individual negotiation.”

The court concluded that such “pricing cannot provide common evidence to establish a prima facie case of class impact,” and denied plaintiffs’ motion for class certification.