Tomato company wants lawsuit reopened against competing producer.
Morning Star Packing Co. of Williams, California, is seeking to revive an antitrust and racketeering lawsuit in the 9th U.S. Circuit Court of Appeals in which it alleged a Los Gatos Tomato Products of Huron, Calif., rival tomato processor, conspired to fix prices and reduce competition. The company said a jury trial is warranted.
Federal judge U.S. District Judge Kimberly Mueller in Sacramento, appointed by former U.S. president Barack Obama, dismissed the lawsuit in 2019 after finding Los Gatos wasn’t part of a bribery scheme and couldn’t be held liable for damages. However, Morning Star contends that, even though its competitor wasn’t directly involved in the crimes, Los Gatos committed other acts of conspiracy among tomato processors that “wouldn’t have been possible without bribery,” according to documents.
The lawsuit came about after multiple California tomato companies, between 2005 and 20, had colluded to undermine the market dominance of Morning Star. “The bribery was just one of the tools by which the essential nature and scope of the conspiracy was being accomplished. It was to illegally manipulate the tomato market to their benefit and to my client’s harm,” said Dale Campbell, an attorney for company, during court proceedings.
Los Gatos countered that the complaint had been tossed because the company didn’t benefit from bribes paid by another processor to purchasing agents, and their efforts were halted by the Federal Bureau of Investigation’s (FBI) probe, which was thorough and execute search warrants that found nothing of interest. Morning Star disagreed.
“Los Gatos teamed up with two other tomato processors to form an export group ostensibly intended to improve access to international markets but actually allowed members to fix prices in the domestic market and divvy up customers to reduce competition,” the lawsuit states, adding, “One of the export group’s members, SK Foods of Williams, Calif., paid bribes to purchasing agents at Nabisco, Frito-Lay, Kraft, Safeway and other companies to ensure they’d buy the company’s tomato paste.”
Several players in the bribery scheme pleaded guilty, including Scott Salyer, the CEO of SK Foods, who was sentenced to six years in prison in 2013. Morning Star filed lawsuits against everyone involved with exporting the products and all were settled except for the complaint against Los Gatos. The plaintiff is now asking the 9th Circuit to reinstate the complaint and have a jury decide its outcome. Morning Star believes a jury will find Los Gatos benefited indirectly from the conspiracy.
“Unless Los Gatos went along with the bribery scheme, SK Foods would not have joined the export group and its activities would not have resulted in financial gain for the other members,” Campbell said during oral arguments. “If that had not happened, the defendant would not have gained $7.5 million of profit,” he said.
Charles Jaeger, attorney for Los Gatos, fired back, “Because they have no evidence that Los Gatos participated in the bribery, or agreed to the bribery, they have to conflate the two conspiracies: the price-fixing conspiracy and the bribery conspiracy. It’s implausible and it’s speculative.”