United States District Court, D. Oregon
INNOVATION MARINE PROTEIN, LLC, an Oregon limited liability company; and FRONT ST. MARINE LLC, an Oregon limited liability company,, Plaintiff,
v.
PACIFIC SEAFOOD GROUP; TRIDENT SEAFOODS CORPORATION, a Washington corporation; CALIFORNIA SHELLFISH COMPANY, INC. a California corporation; FRANK DULCICH; DULCICH, INC., an Oregon corporation; CS PROPERTIES HOLDING COMPANY, LLC, a Delaware limited liability company; and TNMP PROPERTIES, LLC, a Delaware limited liability compnay, Defendants,
OPINION AND ORDER
Michael McShane United States District Judge
Plaintiffs
Innovation Marine Protein, LLC, an Oregon limited liability
company (Innovation Marine), and Front St. Marine LLC, an
Oregon limited liability company (Front Street) bring this
antitrust action under Sections 1 and 2 of the Sherman Act
against defendants Pacific Seafood Group (Pacific
Seafood)[1], California Shellfish Company (Cal-Shell),
and Trident Seafoods Corporation (Trident). Defendants move
to dismiss for, among other reasons, lack of standing. ECF
No. 21, 24-25. Because Innovation Marine and Front Street
lack standing, and because leave to amend would be futile,
this action is DISMISSED, with prejudice.
BACKGROUND[2]
Plaintiff
Front Street is owned by Stephen and Janet Webster, two
long-term residents of Newport, Oregon. “The corporate
mission of Front St. Marine, LLC is to acquire and
develop Newport waterfront industrial property for
the express purpose of building the infrastructure that
will diversify the seafood processing sector on the central
Oregon Coast, thus bringing the benefits of robust
competition in the form of value-added seafood processing,
increased ex vessel prices paid to fishermen and more family
wage jobs to Lincoln County.” FAC ¶ 18 (emphasis
added). “On December 21, 2013, in an effort to secure
adequate industrial property on Yaquina Bay in Newport to
build seafood processing infrastructure, Stephen Webster
of plaintiff Front St. Marine LLC forwarded an offer to
purchase two parcels owned by [Cal-Shell].” FAC ¶
49 (emphasis added). Webster made a cash offer of $900, 000
for either parcel or $1.8 million for both parcels. FAC
¶49. Included with the offer was “a proposed form
of purchase and sale agreement to facilitate a speedy closing
of the transaction.” FAC ¶ 49. On February 24,
2014, Cal-Shell informed Webster that “‘We
currently are not interested in the sale' of the two
properties.” FAC ¶ 50.
15
months later, without contacting Webster, “Cal-Shell
sold its former seafood processing facility and operational
ice plant to [Pacific Seafood] for just $1, 037, 500, a 42%
discount to the December 2013 offer from Front St.
Marine.” FAC ¶ 52. “Cal-Shell and Pacific
Seafood Group conspired to avoid selling the property to
Front St. Marine in order to eliminate the potential for new
seafood processor competition at the site.” FAC ¶
52.
For its
claim under Section 1 of the Sherman Act, plaintiffs allege:
As part
of the Pacific Seafood Group led conspiracy to acquire all
available seafood processing facilities from its existing
competitors on the West Coast when any particular competitor
is interested in disposing of such assets, [Pacific Seafood
and Cal-Shell] conspired to deprive [Front Street] of the
opportunity to develop seafood processing infrastructure in
Newport in 2014-15.
FAC 81
(emphasis added).
“But
for the illegal conspiracy to restrain trade implemented by
[defendants, Front Street] would have acquired the Cal-Shell
waterfront property in Newport and successfully created
the infrastructure for new seafood processor competition
in Newport by the end of 2015.” FAC ¶ 87 (emphasis
added).
For its
claim under Section 2 of the Sherman Act, plaintiffs allege
that defendants “conspired to monopolize the Newport
seafood input markets for trawl caught groundfish, onshore
whiting and pink shrimp by conspiring to transfer Trident and
Cal-Shell's seafood processing assets in Newport to
Pacific Seafood.” FAC ¶ 91.
Front
Street neither alleges nor seeks any economic damages.
Instead, on both claims:
Plaintiff Front St. Marine seeks an order from this Court
requiring Pacific Seafood Group to divest itself of the
Cal-Shell property that it acquired pursuant to an illegal
conspiracy and to transfer that property to plaintiff for the
same price paid by [Pacific Seafood] to Cal-Shell. Plaintiff
Front St. Marine further seeks interim injunctive relief
prohibiting Pacific Seafood from altering the Cal-Shell
property during the pendency of this case.
FAC ¶¶ 88, 98.
Turning
to the other plaintiff:
Plaintiff Innovation Marine Protein, LLC is an Oregon limited
liability company formed for the purpose of acquiring and
operating Trident's seafood processing assets in Newport,
Oregon including a fishmeal plant and seafood processing
facility. Innovation Marine Protein is owned by Richard
Carroll and Edward Backus. Prior to organizing Innovation
Marine Protein in 2017, Richard Carrol and Edward Backus
formed a partnership in 2016 for the purpose of acquiring a
fishmeal plant and associated seafood processing facilities.
It was always contemplated by Mr. Carroll and Mr. Backus that
their partnership would be converted into a limited liability
company which would own and operate the fishmeal plant and
seafood processing facilities.
FAC ¶ 13.
Carrol
and Backus have extensive experience in the fishing industry.
“Richard Carroll has over 40 years of experience in the
design, construction and operation of whiting and surimi
processing plants and fishmeal plants.” FAC ¶
14.[3]
“Edward Backus has 20 years of experience in fisheries
policy and conservation, economic development, and community
fisheries finance.” FAC ¶ 16.[4]
Trident
“refused to negotiate with a principal of
plaintiff Innovation Marine Protein, LLC to sell its Newport
seafood processing facilities and then conspired with Pacific
Seafood to develop a two-step scheme to transfer those assets
to Pacific Seafood.” FAC ¶ 3 (emphasis added). The
FAC proceeds to outline Innovation Marine's attempt to
enter the Newport seafood processing market in order to
potentially compete with Pacific Seafood:
32. On two occasions in November 2016, Richard Carroll met
with Trident COO Mike Luchino to express interest in and
pursue the potential purchase of Trident's Seafood
processing assets in Newport including both the meal
plant and the surimi processing plant. These discussions
continued into December 2016 and were of such a serious
nature that Mr. Carroll disclosed that he had experience with
an advanced technology that would dramatically increase the
profitability of the meal plant by enabling it to produce
food grade or nutraceutical protein rather than being limited
to fishmeal products used in aquaculture.
33. In January 2017, Mr. Carroll told Mr. Luchino that he was
interested in discussing a price for the trident assets
in Newport and negotiating a final deal as soon as
possible. Mr. Luchino promised to contact Trident's
[President] and CEO, Joe Bundrant to determine whether
Trident was seriously interested in selling these assets. In
an email dated January 9, 2017, Mr. Luchino advised Mr.
Carroll that he had talked with Mr. Bundrant, who is
defendant Frank Dulcich's brother- in-law, that Trident
was not interested in selling its assets and “things
are at status quo for now.”
34. The “status quo” did not last long. Shortly
after rebuffing Mr. Carroll, who would have formed
plaintiff Innovation Marine Protein at that time if Trident
had been willing to negotiate a deal, Trident and
Pacific Seafood Group conspired to develop a two-step plan to
transfer Trident's assets to Pacific Seafood Group in a
manner that was designed to evade antitrust scrutiny. First,
Trident secretly sold its meal plant to Pacific Seafood Group
and the co-conspirators concocted the theory that this
transaction was necessary for PSG to support its seafood
processing operations in Newport and therefore did not raise
antitrust concerns. In fact, with the acquisition of
Trident's fishmeal plant, Pacific Seafood Group increased
its share of the fishmeal plant processing capacity on the
West Coast to over 90%. Second, the co-conspirators developed
a plan under which PSG would acquire the surimi processing
plant under antitrust law's “failing business
exception.”
FAC (emphasis added).
Plaintiffs
allege Trident sold the fishmeal plant to Pacific Seafood in
a secret sale on April 10, 2017, FAC ¶ 3, at price below
market value, FAC ¶ 38. Pacific Seafood and Trident then
used the May 15, 2017 start of the pacific whiting season
(and the 100 or so seasonal jobs that go with it), “to
pressure fishermen, the local community, Oregon legislators
and regulators into approving an obviously anti-competitive
takeover of the surimi plant by monopolist Pacific
Seafood.” FAC ¶ 3. A shell company owned by
Pacific Seafood “either holds an option to acquire the
Trident surimi processing plant assets or has already closed
on that deal and owns those assets outright.” FAC
¶ 2. After Pacific Seafood closed the transactions with
Cal-Shell and Trident, it held over 95% of the seafood
markets for trawl caught groundfish, onshore whiting and pink
shrimp in the Newport market. FAC ¶ 8.
On its
Sherman Act Section 1 claim, Innovation Marine alleges:
80. As part of the Pacific Seafood Group led conspiracy to
acquire all available seafood processing facilities from its
existing competitors on the West Coast when any particular
competitor was interested in disposing of such assets,
defendants Pacific Seafood Group and Trident Seafoods
Corporation conspired to deprive plaintiff Innovation Marine
Protein, LLC of the opportunity to enter the seafood
processing and meal plant business in Newport in time to
commence operations during the 2017 whiting season.
83. But for the illegal conspiracy to restrain trade
implemented by PSG and Trident, and Cal-Shell, plaintiff
Innovation Marine Protein LLC would have acquired the Trident
processing plant and meal plant assets and successfully
entered the seafood processing business in Newport prior to
the beginning of the 2017 whiting season. The loss of that
opportunity has caused damages to plaintiff Innovation Marine
Protein estimated at $2 million in lost net profits in 2017.
84. Plaintiff Innovation Marine Protein seeks an order from
this Court requiring Pacific Seafood Group to divest itself
of the Trident property that it acquired pursuant to an
illegal conspiracy and to transfer that property to plaintiff
for the same price paid by PSG to Trident. Plaintiff
Innovative Marine Protein further seeks interim injunctive
relief prohibiting Pacific Seafood from altering the Trident
property during the pendency of this case.
FAC.
Plaintiffs
allege the relevant product markets are the west coast
seafood markets for groundfish, pacific onshore whiting and
pacific coldwater shrimp. FAC § IV. Plaintiffs describe
Pacific Seafood's expansion of monopoly power over the
past decade through numerous anti- competitive ...