Court's denial of class-action status favors Supervalu

  • Article by: DAN BROWNING , Star Tribune
  • Updated: July 26, 2012 - 11:05 PM

Independent grocers allege that wholesalers split up territory to reduce competition.

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Supervalu Northern region offices and warehouse in Hopkins.

Photo: Bruce Bisping, Star Tribune

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A group of independent grocers will not get class-action status to press their antitrust cases against Supervalu Inc. and C&S Wholesale Grocers Inc. over a deal to divide up markets in the Midwest and New England.

U.S. District Judge Ann Montgomery said in an order made public Thursday that the plaintiffs had failed to establish a case that an agreement between Eden Prairie-based Supervalu and C&S, based in Keene, N.H., had caused a common injury to the myriad potential plaintiffs in the class.

Supervalu spokesman Mike Siemienas said the ruling puts the ball in the plaintiffs' court.

"We believe the court reached the right conclusion and are pleased with the outcome," he said. "This ruling means the case cannot proceed as a class action."

Plaintiffs attorney Joe Bruckner said his clients disagree with the ruling and are devising a strategy to move forward.

"Clearly, it's not the ruling we had hoped for," Bruckner said. "By no means is it over. ... An agreement to divide markets among the country's two largest grocery wholesalers, we think, is clearly a violation of the antitrust laws and we're confident of the underlying merits of our claim."

The plaintiffs are retail grocers who allege that Supervalu and C&S, two of the nation's largest grocery product wholesalers by sales volume, agreed to split up territory and customers to reduce competition. They filed two separate lawsuits alleging that the agreement drove up prices, and they seek unspecified treble damages and attorney's fees under the Clayton Antitrust Act.

'Operation Salmon'

The controversy dates to 2003 when Supervalu was looking to divest itself of underperforming retail stores, customer agreements and operating warehouses in New England. It began negotiations with C&S, according to a sworn statement by David Boehnen, a Supervalu executive involved in the discussions.

Supervalu dubbed the divestiture project "Operation Salmon." But in April 2003 another major wholesaler, Fleming Cos. Inc. of Lewisville, Texas, filed for Chapter 11 bankruptcy protection. Supervalu sought to acquire much of Fleming's wholesale business operations, Boehnen said. But negotiations faltered, and C&S stepped in.

Supervalu and C&S negotiated an agreement in September 2003 in which C&S assigned to Supervalu certain Fleming assets for its Midwest wholesale operations, and Supervalu assigned to C&S its New England wholesale assets and certain retail assets, Boehnen said.

The "assets exchange agreement" included a non-compete provision that barred Supervalu and C&S from supplying former customers served from a certain distribution center for two years, and each agreed not to solicit those customers for five years.

Both sides presented experts to argue that the agreement either did, or did not, harm the independent grocers. Montgomery analyzed the arguments separately for New England and for the Midwest in an exhaustive, 34-page opinion and order. She noted that the price negotiations between the wholesalers and individual retailers varied widely. Although that by itself doesn't bar a class-action, Montgomery found that the plaintiffs had failed to establish that they suffered a common harm.

Dan Browning • 612-673-4493

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