In re Linerboard Antitrust Litigation

• Decision Date: 28 July 2006
• Docket Number: CIV.A. No. 03C-3944.,CIV.A. No. 03-5231.,(Civil Action No. 03C-3944, United States District Court for the Northern District of Illinois),No. MDL 1261.,MDL 1261.
• Citation: 443 F.Supp.2d 703
• Parties: In Re LINERBOARD ANTITRUST LITIGATION This Document Relates to: The Procter & Gamble Company, et al. Plaintiffs, v. Stone Container Corp., et al. Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

443 F.Supp.2d 703

In Re LINERBOARD ANTITRUST LITIGATION This Document Relates to: The Procter & Gamble Company, et al. Plaintiffs, v. Stone Container Corp., et al. Defendants.

(Civil Action No. 03C-3944, United States District Court for the Northern District of Illinois)

No. MDL 1261.

CIV.A. No. 03-5231.

CIV.A. No. 03C-3944.

United States District Court, E.D. Pennsylvania.

July 28, 2006.

COPYRIGHT MATERIAL OMITTED

MEMORANDUM & ORDER

DuBOIS, District Judge.

I. INTRODUCTION

Presently before the Court is Defendants' Motion for Summary Judgment Directed to Plaintiff FAC Acquisition, LLC. Defendants assert that direct action plaintiff FAC Acquisition, LLC ("FAC") lacks standing to assert claims in this antitrust litigation because FAC never made any direct purchases from defendants and the antitrust claims of entities that did make direct purchases were not validly assigned to FAC. For the reasons set forth below, the Court concludes that FAC does not have standing to assert claims in this litigation and, therefore, grants defendants' motion for summary judgment.

II. BACKGROUND

This multidistrict litigation involves allegations that a number of United States manufacturers of linerboard¹ engaged in a combination and conspiracy in unreasonable restraint of trade and commerce in violation of the Sherman Act, 15 U.S.C. § 1, and various state antitrust statutes. The Court sets forth only an abbreviated factual and procedural history as pertinent to address defendants' pending Motion for Summary Judgment.

The factual background of the case is described at length in this Court's previous opinions. See In re Linerboard Antitrust Litig., MDL No. 1261, 2000 WL 1475559 (E.D.Pa. Oct. 4, 2000) ("Linerboard I"); In re Linerboard Antitrust Litig., 203 F.R.D. 197 (E.D.Pa.2001) ("Linerboard II"); In re Linerboard Antitrust Litig., 305 F.3d 145 (3d Cir.2002) ("Linerboard III"); In re Linerboard Antitrust Litig., 296 F.Supp.2d 568 (E.D.Pa.2003) ("Linerboard IV"); In re Linerboard Antitrust Litig., 2004 WL 1221350 (E.D.Pa. Jun.2, 2004) ("Linerboard V"); In re Linerboard Antitrust Litig., 223 F.R.D. 357 (E.D.Pa. 2004) ("Linerboard VI"); In re Linerboard Antitrust Litig., 223 F.R.D. 335 (E.D.Pa.2004) ("Linerboard VII"); In re Linerboard Antitrust Litig., 2005 WL 1625040 (E.D.Pa. July 11, 2005) ("Linerboard VIII").

A. The Class Case

Class plaintiffs named the following defendants in their Complaints and Amended Complaints—Stone Container Corporation, Jefferson Smurfit Corporation, Smurfit-Stone Container Corp., International Paper Company, Georgia-Pacific Corporation, Temple-Inland, Inc., Gaylord Container Corporation, Tenneco, Inc., Tenneco Packaging, Inc., Union Camp Corporation, Packing Corporation of American and Weyerhaeuser Paper Company—and alleged that these defendants conspired to raise the price of corrugated containers and corrugated sheets throughout the United States by restricting production and/or curtailing inventory in violation of federal antitrust laws.

By Memorandum and Order dated September 4, 2001, this Court certified the following two plaintiff classes: a "sheet class" consisting of buyers of corrugated sheets and a "box class" consisting of purchasers of corrugated containers. Linerboard II, 203 F.R.D. at 224. The Court's certification ruling was affirmed by the United States Court of Appeals for the Third Circuit and the Supreme Court denied certiorari. See Gaylord Container Corp. v. Garrett Paper, Inc., 538 U.S. 977, 123 S.Ct. 1786, 155 L.Ed.2d 666 (2003). All claims in the class case were resolved for a total of $202,572,489. By Order dated February 10, 2005, the Court approved initial distribution of over 90% the settlement fund to the classes; it approved a second distribution by Order dated June 28, 2005. By Order dated November 2, 2005, the Court approved a final distribution to all claimants.

B. The Direct Actions

One-hundred and forty entities opted out of the classes certified by the Court by filing Requests for Exclusion on or before June 9, 2003, including FAC.² These 140 entities opted-out themselves and approximately 3400 subsidiary and affiliate companies.³ Of the 140 Requests for Exclusion, thirteen groups of opt-outs subsequently filed direct actions against defendants alleging both federal and state claims. As of the date of this Memorandum, nine of those groups have outstanding claims against defendants Temple-Inland, Inc. and Gaylord Container Corp.⁴ In the nine remaining actions, the claims against all other defendants have either been settled or withdrawn.

All of the remaining direct actions were originally filed in districts other than the Eastern District of Pennsylvania and were transferred to this Court for coordinated pretrial proceedings pursuant to 28 U.S.C. § 1407. On August 6, 2003, a conditional transfer order was issued by the Judicial Panel on Multidistrict Litigation pursuant to Rule 7.4 of the Rules of Procedure of that Panel. Linerboard IV, 292 F.Supp.2d at 652. That order, which became final on August 21, 2003, provided for the transfer to this Court of eight of the nine remaining direct actions. Id. The ninth direct action, Mars Inc., et al. v. Stone Container Corporation, et al., No. 03-6977 (N.D. Ill. filed October 1, 2003), was transferred pursuant to a conditional transfer order dated December 8, 2003. That order became final on December 23, 2003.

C. Direct Action Plaintiff FAC Acquisition, LLC

On June 9, 2003, FAC opted-out of the class action. Amended Notice of Request to be Excluded from the Linerboard Box and Sheet Classes at 4, Def. Ex. 1. On June 10, 2003, The Procter & Gamble Company, as lead plaintiff, and a number of other parties, including FAC, filed a direct action against all defendants. Procter & Gamble Compl. ¶ 28, Def. Ex. 2. The Complaint in this action has been amended twice. In the Second Amended Complaint, FAC alleges that it and "its subsidiaries, affiliates, predecessors-in-interest and assigns (collectively `FAC'), purchased substantial quantities of corrugated material from one or more of the Defendants during the relevant period...." Procter & Gamble Second Amen. Compl. ¶ 30 (Document No. 58). FAC asserts a federal antitrust claim under Section 1 of the Sherman Act (15 U.S.C. § 1) and a state antitrust claim under Tennessee's antitrust statute, Tenn.Code Ann. §§ 47-25-101, 47-25-106.⁵ Procter & Gamble Second Amen. Compl. ¶¶ 122-124, 163-168.

FAC has admitted that it did not purchase corrugated boxes or sheets from any of the defendants during the time period relevant to this litigation. Plaintiff FAC Acquisition LLC's Amended Individual Responses to Defendants' First Joint Set of Interrogatories (hereinafter "Amended Responses") at 2, Def. Ex. 3. Instead, FAC asserts antitrust claims on behalf of three companies—Fingerhut Companies, Inc., Fingerhut Corporation, and Tennessee Distribution, Inc. (collectively, "Fingerhut"). Id. at 4. FAC contends it is entitled to assert Fingerhut's claims based on its purchase of the operating assets of Fingerhut from Federated Department Stores ("Federated") in an Asset Purchase Agreement (the "Agreement") dated as of June 11, 2002. Id. at 4-5. Prior to the Agreement, Fingerhut was a wholly owned subsidiary of Federated, and Fingerhut Corp. and Tennessee Distribution, Inc. were wholly owned subsidiaries of Fingerhut. Agreement at 1 (Recital B), Def. Ex. 4; Plaintiff FAC Acquisition, LLC's Response to Defendants' Supplemental Set of Interrogatories (hereinafter "Supplemental Response") at 3, Def. Ex. 5. According to FAC, Fingerhut's claims arise out of purchases of corrugated containers or sheets by Fingerhut Corp. and Tennessee Distribution, Inc., between 1992 and 1998. Pl. Opp. at 1.

The Agreement contains several provisions pertinent to the Court's analysis. First, Recital C expresses the parties' intent as to the scope of the Agreement: "Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, certain of the assets of the Direct Marketing Business . . . ."⁶ Agreement at 1. Next Article 1 describes the "assets to be sold and retained." Id. Section 1.1, labeled "Acquired Assets," identifies nine categories of property to be conveyed. Id. at 1-2. The list does not include, specifically, the right to assert claims against third parties, a fact not disputed by FAC. Section 1.2 of the Agreement, entitled "Excluded Assets," describes the assets not transferred and explains that "Seller is not selling, conveying, transferring, delivering, or assigning to Purchaser, and Purchaser is not purchasing or acquiring from Seller, any assets or property of Seller other than the Acquired Assets, including, without limitation ...." Id. at 2. The two categories of enumerated "Excluded Assets" include "the equipment, other personal property and intellectual property used by Seller in connection with credit and collection activities" and "all tax refunds with respect to taxable years of Seller ending on or before the Closing Date." Id. at 3. The parties dispute whether the list of Excluded Assets is exhaustive.

Several other provisions in the Agreement are implicated by the Court's analysis. In Section 4.3 of the Agreement, Fingerhut represented that there was no litigation pending or threatened relating to the Acquired Assets. Id. at 5-6. Specifically, Fingerhut warranted that:

Except for those items listed on Schedule 4.3, there are no suits, actions, governmental investigations, administrative hearings, arbitrations or other proceedings ... pending or, to Seller's Knowledge, threatened, by or against or affecting Seller in connection with, or relating to, the Acquired Assets, the transactions contemplated by this Agreement or any action taken or to be taken in connection herewith or the consummation of the transactions contemplated hereby . . .

Id. at 5 (emphasis in original). Section 10.4, entitled "Entire Agreement," explains that the "Agreement . . . supersede[s] any...