Opinion
Civil No. 98-565 (JRT/RLE).
November 21, 2002
Daniel E. Gustafson and Daniel C. Hedlund, HEINS, MILLS OLSON, Minneapolis, MN; and Daniel A. Small, COHEN MILSTEIN HAUSFELD TOLL, Washington, DC, for plaintiff.
Frank R. Berman, LAW OFFICE, Edina, MN, for defendant Up North Plastics.
John D. French, FAEGRE BENSON, P.L.L.P., Minneapolis, MN, for defendant Ag-Bag International, Ltd.
MEMORANDUM OPINION AND ORDER DENYING MOTION TO RECONSIDER CLASS CERTIFICATION ORDER
Plaintiff S S Forage Equipment Co. ("S S Forage" or "S S") brought this class action (on behalf of itself and other purchasers) against defendants alleging price-fixing claims relating to defendants' sale of plastic silage products. This Court denied plaintiff's motion for class certification in a Memorandum Opinion and Order dated May 12, 2000 ("Order" or "May 12 Order"). The Court held that plaintiff did not meet the adequacy and typicality requirements to qualify as class representatives. Plaintiff has moved for reconsideration of the Court's denial of class certification. For the reasons discussed below, the Court again denies the motion for class certification.
Defendants are Up North Plastics, Inc. and Ag-Bag International, Ltd. This opinion refers to the defendants collectively.
BACKGROUND
A more extensive discussion of the factual background can be found in the May 12 Order.
Defendants manufacture silage bags and other products used in the agriculture industry. Silage bags are huge disposable plastic bags that are specially made to be filled with feed or grain and then stored outside on the ground. The bags are used primarily on dairy and livestock farms, and are a relatively new storage product. According to the complaint, Ag-Bag and Up North are the dominant sellers of silage plastic products in the United States.
Prior to 1995, Up North sold most of its agricultural storage products through a network of independent distributors, who then sold the products to dealers and end-users. Plaintiff is a former distributor of Up North and claims that Up North and Ag-Bag conspired to fix prices in the agricultural storage products industry. Plaintiff alleges that it purchased bags from Up North during the proposed class period, although defendants point out that plaintiff ceased making such purchases in late 1994 and began purchasing from Siloflex, a competitor of Up North and Ag-Bag.
Up North counterclaimed against plaintiff, alleging that a group of its former independent distributors, including plaintiff, entered into what it called a "Group Boycott Agreement" with Siloflex, and that the agreement violated antitrust laws. In a Memorandum Opinion and Order dated March 28, 2000, the Court granted plaintiff's motion for summary judgment on this counterclaim.
ARGUMENTS
I. Plaintiff
Plaintiff argues that circumstances have changed since this Court's original Order, such that class certification is now appropriate.
A. Arbitration
First, plaintiff argues that arbitration is no longer an impediment to class certification, because plaintiff and defendant Up-North Plastics completed arbitration proceedings in August of 2001. Although plaintiff conceded that it can no longer bring the claims that were arbitrated, plaintiff argues that fact does not mitigate against class certification.
A representative, plaintiff argues, need not have purchased defendants' products during the entire class period to represent a class for that period. See In re Wirebound Boxes Antitrust Litig., 128 F.R.D. 268, 270-71 (D.Minn. 1989). Plaintiff further claims that even if a class representative is required to have purchased products throughout the time period, S S can represent absent class members who purchased Ag-Bag products during the arbitration period.
B. Plaintiff's absence from the business
Plaintiff's absence from the business raised two concerns for this Court in its initial denial of class certification. First, plaintiff was in no position to seek injunctive relief, and second, plaintiff's interests were potentially in conflict with other class members who maintained relationships with defendants. Plaintiff attempts to show that neither of those conditions remain impediments to class certification.
Plaintiff argues that defendants have long since ceased illegal operations, therefore, plaintiff reasons, injunctive relief is now moot and plaintiff's inability to seek injunctive relief should no longer be a barrier to class certification. Plaintiff adds that the potential damages in this case are not high enough to disrupt the supply of silage bags to class members who still do business with the defendants. Plaintiff implies that even if they achieve the highest anticipated recovery, current class members will not have to go without silage bags.
In addition, plaintiff argues it is a better class representative than someone still in the business because it cannot be pressured into dismissing its claims to ensure the continuance of a business relationship with defendants. In support of this argument, plaintiff offers the affidavit of Patricia and Donald Steward. The Stewards are Ag-Bag dealers, and were the named plaintiffs in a case similar to the one before this Court. The Stewards' affidavit indicates that they felt pressured by Ag-Bag executives to discontinue their lawsuit. The Steward lawsuit was dismissed voluntarily.
C. Absent Class Members
Finally, plaintiff argues that S S Forage is the only opportunity for absent class members to litigate their claims because, as noted, the Steward case has been dismissed.
II. Defendants
Defendants argue that plaintiff still cannot seek injunctive relief, which evidences an inability to seek relief that might be of interest to some class members. More persuasively, defendants argue that plaintiff's interests remain potentially adverse to those of the class. Defendants assert that current customers might have an interest in the defendants' continued vitality, while plaintiff's only interest is to maximize its recovery.
ANALYSIS
As the Court noted in its May 12 Order, a class may be certified only if, after a "rigorous analysis," the Court is satisfied that all the prerequisites to certification are met. See General Telephone Co. v. Falcon, 457 U.S. 147, 161 (1982). This analysis is no less rigorous on reconsideration. The Court initially denied class certification on the basis of adequacy and typicality; the Court found that the requirements of numerosity and commonality were met, and did not reach the predominance requirement of Rule 23(b)(3). (Order at 16.)
As noted in the May 12 Order, the typicality and adequacy requirements of Rule 23(a) ensure that the interests and goals of the named representatives are sufficiently aligned with those of the putative class. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 626 n. 20 (1997). As it was required to do, the Court "evaluate[d] carefully the legitimacy of the named plaintiff's plea that he is a proper class representative under Rule 23(a)." General Telephone Co. v. Falcon, 457 U.S. 147, 160 (1982). Careful evaluation is necessary because typicality and adequacy are necessary to comport with the requirements of due process. See In re South Cent. States Bakery Prods. Antitrust Litig., 86 F.R.D. 407, 418 (M.D.La. 1980). To be adequate and typical, a class representative "must be part of the class and `possess the same interest and suffer the same injury' as the class members." East Texas Motor Freight Sys. Inc. v. Rodriguez, 431 U.S. 395, 403 (1977) (quoting Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208, 216 (1974)).
Plaintiff has not assuaged the Court's concern that "the fact that [plaintiff] is no longer in business raises serious questions about its typicality and adequacy." (Order at 16) (citing In re Milk Prods. Antitrust Litig., 195 F.3d 430, 437 (8th Cir. 1999), cert. denied, 120 S.Ct. 1534 (2000)).
Plaintiff's argument, that S S's status as class representative is actually improved because it is no longer in the silage bag business, is not persuasive. This argument was rejected on plaintiff's initial motion for class certification and nothing has changed. This lawsuit remains plaintiff's entire business. As such, plaintiff's main interest in this lawsuit would be to maximize its financial recovery. Other class members, however, may have ongoing relationships with defendants that could lead them to take a different approach to litigation and settlement. Cf. Plekowski v. Ralston Purina Co., 68 F.R.D. 443, 452-53 (M.D.Ga. 1975) (explaining that a former customer of the defendants was not a proper class representative). Either approach is valid, but they do not mesh well when considering class certification. Accordingly, the Court again concludes that plaintiff's exit from the silage bag industry precludes it from being an adequate or typical class representative.
Plaintiff has now arbitrated the post-July 26, 1994 claims, and can no longer bring those claims before this Court. Contrary to plaintiff's assertion, this does not improve plaintiff's standing as a potential class representative. The post-July 26, 1994 time period encompasses a significant portion of the proposed four-year class period. The two distinct problems the Court noted in its initial denial of class certification remain.
In the initial denial of class certification, the Court expressed concern about plaintiff's ability to fully and fairly represent the interests of the class while plaintiff's claims were stayed pending arbitration. (Order at 18 (citing J.W.T., Inc. v. Joseph E. Seagram Sons, Inc., 63 F.R.D. 139, 143 (N.D.Ill. 1974).) The parties have now completed the arbitration, and agreed to dismiss with prejudice those claims that were subject to arbitration. Therefore, plaintiff cannot bring those claims before this Court, and as such, plaintiff remains hindered from representing the proposed class members during the post-July 26, 1994 time period.
The original order noted that:
While other courts have found that the presence of potentially arbitrable claims is not a barrier to certification, see Lerner v. Haimsohn, 126 F.R.D. 64, 66 (D.Colo. 1989); Shankroff v. Advest, Inc., 112 F.R.D. 190, 194 (S.D.N.Y. 1986), in those cases it was unnamed class members, not the proposed class representative, whose claims were possibly subject to arbitration. Other courts have indicated that the presence of arbitrable claims bears on the numerosity requirement because individuals required to arbitrate their claims are not members of the class. See Kirkpatrick v. J.C. Bradford Co., 827 F.2d 718, 725 n. 5 (11th Cir. 1987).
Moreover, the arbitration clause remains "a unique defense that threatens to play a major role in this litigation." (Order at 18 (citing Milk Products, 195 F.3d at 437).) While the Court has determined that Ag-Bag may not itself invoke the arbitration clause, plaintiff continues to face the prospect of litigating this determination on appeal. In contrast, the majority of the class purchased directly from Ag-Bag and would not face a similar defense.
As the Court initially found, plaintiff's lack of standing to seek injunctive relief, its potential conflict with other class members, and the arbitration issues combine to lead the Court to the inevitable conclusion that plaintiff is not an adequate or typical class representative. Plaintiff's motion to reconsider the class certification order is therefore denied.
As in the original denial of class certification, the Court does not address the defendants' argument that plaintiff cannot meet the predominance requirement of Rule 23(b)(3).