Third Circuit Rules that Food Service Management Companies and Distributors are Not Competitors for Robinson-Patman Act Analysis
If a manufacturer is selling the exact same goods to someone else for 59% less than it will sell to you, it would seem natural that you'd pick up the phone and call your lawyer and sue someone, wouldn't it? In particular, this would seem to be a classic violation of the Robinson-Patman Act,15 U.S.C. Section 13. Feesers, Inc., a food distributor, found itself in just that situation in buying liquid eggs from Michael Foods, Inc. It sued Michael Foods and Sodexo, Inc., the food service management company that was getting that huge discount, in federal court. Both sides brought high-priced legal talent to bear and the case marched up and down the federal courts until, on January 7, the U.S,. Court of Appeals for the Third Circuit ruled that Feesers was wrong. Because Sodexo was not, in its opinion, a competitor of Feesers, the Robinson-Patman Act was not violated.
The case is complex, as is much Robinson-Patman litigation, but essentially it hinges on when the actual sales to Feesers or Sodexo might occur. Feesers is a classic food distributor. In connection with liquid eggs, that means that it sells to what are called "self-ops", or businesses that run their own food services, such as a college dorm or a retirement home. Sodexo, on the other hand, is a food service management company, which provides essentially turnkey services to businesses that are not interested in running their own food services. The critical fact, to the Third Circuit, is this: while Feesers and Sodexo may compete for the same customers, the competition between them is over when the customer decides to be a self-op or to use a food service management company. And, critically, that competition takes place before as single liquid egg is sold to the winner by Michael.
The Third Circuit relied on a recent U.S. Supreme Court case, Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc. and its own decision in Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc., both of which had held that the question of whether two entities were in competition was to be construed both narrowly and formally.
In sum, because any competition between Feesers and Sodexo occurred at the time an institution was deciding whether to self-operate or hire a food service management company, and any resulting sale of Michaels’s products would have to occur after that competition, Feesers cannot show that it was a competing purchaser of Sodexo. The evidence produced by Feesers only further confirms the futility of its RPA claims, because such evidence—evidence showing consistent favoring of another purchaser over the plaintiff over time by a manufacturer in a bid market—was rejected in Toledo Mack. Such evidence cannot support an inference of competitive injury in a bid market. Finally, the Supreme Court’s instructions to narrowly construe the RPA also compel us to reject Feesers’s RPA claims.
Future plaintiffs faced with what seems to be a price differential for what they consider at first glance to be their competitiors will be well-served to engage in a deeper analysis prior to suit. Where you stand in the food chain will need to be pretty much exactly where your price-advantaged competitor stands or the benefit of Robinson-Patman may be denied you.
Consumer Fraud Claims: Examples of Good and Bad Motion Practices
The Good: Tropicana recently brought a motion to dismiss the Zupnik putative consumer fraud class claims pending against it. Zupnik alleges that Tropicana misled consumers in the promotion of its “Pure 100% Juice Pomegranate Blueberry Flavored Blend of 5 Juices from Concentrate with other Natural Flavors” because its front label did not include pictures of fruits other than pomegranates and blueberries.
Tropicana’s motion, brought under both FRCP 9(b) and 12(b)(6), appears as a good example of how putative consumer class claims can be challenged at the outset of the case. Though we don’t yet know whether Tropicana will be successful, its pleading is a sharp attack on the plaintiff’s complaint and takes advantage of the heightened pleading requirements announced recently by the Supreme Court.
Tropicana moved on the basis that the complaint lacks particularity required under Rule 9(b) (the rule requires pleading of the “particularity of the fraud”). It also challenged whether the plaintiff had any injury in fact or alleged any reliance on particular advertising. Finally, Tropicana argued that Zupnik’s claims were expressly preempted by federal law.
Tropicana cites to Twombly to urge the court to disregard “plaintiffs legal conclusions . . . even when made, as here, in the guise of factual allegations.”
Tropicana also attacks Zupnik’s complaint on the basis that “she got what she paid for.” Tropicana points out that its product sold for far less than juice with a higher level of pomegranate or blueberry juices. Because she got what she paid for (presumably regardless of whether she understood it at the time of purchase), she lacks standing to bring a claim for consumer fraud.
The Bad: Coincidently, in another case involving a putative consumer fraud class claim over depictions of fruits on a label, Judge Gorton of the United States District Court for the District of Massachusetts in Wiley v. Gerber Products Company granted Gerber’s motion to transfer to the Southern District of California for consolidation with the Williams case pending in California. (The Williams case was previously discussed in this blog.)
The lesson from Wiley v Gerber: if your strategy is to avoid transfer of venue, think about this when pleading. For example, do not include allegations in the complaint about a nationwide class and the application of different states’ consumer protection laws.
Wiley argued against transfer, contending that the “Court’s familiarity with Massachusetts law, under which several claims are brought weights against transfer.” The problem is that “in her amended complaint, Wiley added several claims under New Jersey state law which only undermines her contention that this Court is especially competent to adjudicate the state laws at issue in this dispute.” Wiley also alleged a nationwide class. The court found that the plaintiff’s choice of forum mattered little when she alleged a nationwide class.
Update: Supreme Court Declines Review of Methylmercury Case With Potential Preemption Implications
An update to a case we’ve been following: the U.S. Supreme Court has refused to review a decision by the U.S. Court of Appeals for the Third Circuit involving state-law claims over methylmercury content in canned tuna.
The Supreme Court’s order in Tri-Union Seafoods, LLC v. Fellner leaves in place the Third Circuit’s ruling that allowed the plaintiff to sue the maker of Chicken of the Sea products over methylmercury poisoning she allegedly suffered after consuming canned tuna almost exclusively for five years.
In its petition for a writ of certiorari, Tri-Union Seafoods argued that the Supreme Court should review the case to determine, among other things, whether regulatory actions by the U.S. Food and Drug Administration and the Federal Food, Drug, and Cosmetics Act preempt state-law claims based on a failure to warn of the risks of methylmercury in tuna products. The Supreme Court declined to review the case without comment.
