Opinion
Case No. C-01-0944-CRB (JCS), related to MDL No. 1311
August 24, 2001
Kenneth L. Adams (Admitted pro hac vice), John P. Pierce and Christopher Leonardo (Admitted pro hac vice), DICKSTEIN SHAPIRO MORIN OSHINSKY LLP, Washington, DC., Attorneys for Tyson Foods, Inc., et al.
William L. Jaeger and James G. Gilliland, Jr., TOWNSEND and TOWNSEND and CREW, LLP, San Francisco, CA, Attorneys for Tyson Foods, Inc., et al.
TYSON PLAINTIFFS' MEMORANDUM IN OPPOSITION TO DEFENDANTS' MOTION TO STRIKE
The defendants have moved to strike certain allegations regarding the vitamins antitrust conspiracy from the Tyson plaintiffs' ("Plaintiffs") amended complaint ("Amended Complaint"), claiming that the allegations are "unduly prejudicial, immaterial and impertinent". Contrary to the defendants' contention, the challenged bulk vitamins allegations are relevant and pertinent to this controversy. The evidence at trial will show that throughout the 1990's the defendants perpetrated and furthered the methionine conspiracy in substantially the same way (and often through many of the same corporate executives) as the participants in the vitamins cartel (which included Rhone-Poulenc and Degussa). Thus, the challenged allegations relate to evidence that will be admissible at trial to provide historical context of the facts for the jury, to prove the defendants' intent, knowledge, opportunity, absence of mistake or accident, and common scheme or plan, and in some cases, because the evidence is so interwoven with the methionine conspiracy it will be impossible or inappropriate to separate. Moreover, the defendants cannot reasonably claim that the subject allegations cause them undue prejudice, as Rhone-Poulenc and Degussa made public many of the very facts the defendants now seek to suppress.
See Plaintiffs' Amended complaint at ¶¶ 37, 38 and 53, and infra at page 8.
Defendants' Motion to Strike, at 2.
Defendant Mitsui Co. Ltd. is also a defendant in the In re: Vitamins Antitrust Litigation as an alleged member of the same vitamins cartel.
Defendants Rhone-Poulenc SA, (n/k/a Aventis SA) and its related subsidiaries and affiliates, Rhone-Poulenc Animale Nutrition SA (n/k/a Aventis Animal Nutrition SA), Rhone-Poulenc, Inc., Rhone-Poulenc AG Company, Inc., Aventis CropScience, Inc., Rhone-Poulenc Animal Nutrition, Inc., Aventis, Inc., Rhone-Poulenc Sante Vegetale Animale S.A., Rhone-Poulenc Agro S.A. (n/k/a Aventis CropScience S.A.); Rhone-Poulenc Holdings Inc., and Aventis Animal Nutrition, Inc., are collectively described as "Rhone-Poulenc".
Defendants Degussa Corp. and Degussa AG are collectively described as "Degussa."
At this early stage of the proceeding, striking these allegations is premature and unwarranted. The time for addressing the admissibility of evidence is at trial, or in motions in limine shortly before trial, not at the preliminary pleading stage before the central defendants have even answered the Complaint, let alone provided pretrial discovery. For the reasons set forth herein, the motion should be denied.
I. MOTIONS TO STRIKE WILL NOT BE GRANTED UNLESS THE ALLEGATIONS AT ISSUE ARE IN NO WAY RELATED TO THE CONTROVERSY AND ARE UNDULY PREJUDICIAL
Motions to strike a portion of a pleading are strongly disfavored and are infrequently granted. Lazar v. Trans Union LLC, 195 F.R.D. 665 (C.D. Cal. 2000) (denying motion to strike portion of complaint regarding agency's prior alleged incidents of mismanagement); Clement v. American Greeting Corp., 636 F. Supp. 1326, 1332 (S.D. Cal. 1986) (denying motion to strike allegations of a conspiracy in wrongful discharge action). This is especially true in antitrust cases. Daishowa Int'l v. North Coast Export Co., 1982 WL 1850 (N.D. Cal. May 24, 1982) (denying motion to strike antitrust claims and defenses in antitrust action alleging that Japanese company had operated a buyer's cartel, fixed prices and allocated customers).
Motions to strike allegations in a pleading as "immaterial", "impertinent" or "impressible" are governed by a two part test: the motion should be denied unless the subject allegations have "no possible relation to the controversy" and are "prejudicial" to a party. 5A Charles Alan Wright Arthur R. Miller, Federal Practice and Procedure § 1382, 685-86 (2d ed. 1990) (emphasis added). The defendants' motion fails to meet either part of this test. With regard to the first prong, motions to strike allegations in a pleading as "immaterial" and "impertinent" are denied if there "is any doubt as to whether the allegations might be an issue in the action." In Re 2THEMART.COM., INC. SECURITIES LITIGATION, 114 F. Supp.2d 955, 964-66 (C.D. Cal. 2000) (in securities fraud action, denying motion to strike references to news articles describing that defendant improperly diverted company funds, and that co-defendant pled guilty to conflict of interest as attorney). With regard to the second prong of the test, the defendants must demonstrate that these allegations cause them "prejudice." The defendants cannot show "prejudice," and therefore necessarily fail to pass the remaining part of the test.
"[B]ecause motions to strike on these grounds are not favored, often being considered `time wasters,' they usually will be denied unless the allegations have no possible relation to the controversy and may cause prejudice to one of the parties. Thus, a motion to strike frequently has been denied when no prejudice could result from the challenged allegations. . . ." Charles Alan wright Arthur R. Miller, Federal Practice and Procedure, supra, § 1382, at 685-90.
A. THE CHALLENGED ALLEGATIONS ARE RELATED TO THE CONTROVERSY
The Amended Complaint alleges that the defendants engaged in a worldwide conspiracy to fix the price and allocate the customers and markets for methionine. Methionine is an amino acid that is added to animal feed, primarily in the poultry industry. As alleged in the Amended Complaint and as will be demonstrated at trial, during the 1990's some of these methionine defendants were also involved in an illegal cartel which fixed prices and allocated customers for other feed additives, such as vitamin B3 (also known as niacin), which is produced by Degussa, and vitamins A, E and B12 (also known as riboflavin), which are produced by Rhone-Poulenc. The evidence at trial will show that some of the same employees of Degussa and Rhone-Poulenc who had responsibilities for methionine also had responsibilities for these other feed additives. Indeed, the evidence will show that methionine was discussed in vitamins cartel meetings.
A motion to strike should be denied if evidence to support the allegation is admissible. Many antitrust cases have admitted evidence of a defendant's participation in a separate but related conspiracy. United States v. Suntar Roofing, 897 F.2d 469, 479-80 (10th Cir. 1990) (ruling 404(b) evidence concerning similar customer allocation agreements entered into by defendants before and during time period of charged customer allocation conspiracy was admissible as relevant to issue of intent); United States v. Southwest Bus Sales, Inc., 20 F.3d 1449 (8th Cir. 1994) (allowing 404(b) evidence of the prior related conspiracies as "admissible and relevant to the issue of intent to conspire, motive, and lack of mistake."); United States v. Misle Bus Equip. Co. 967 F.2d 1277 (8th Cir. 1992) (holding in bid rigging trial that evidence of another conspiracy was properly admitted to show defendants' knowledge and general intent to conspire in instant case); United States v. Bi-Lo Payers, 741 F.2d 730, 736 (5th Cir. 1984) (admitting evidence that corporate defendant's agent had attempted to rig bids in corporation's name on several other occasions and that defendant's president and a corporate employee had tried to get competitors to refrain from bidding on the project at issue as relevant to show agent acted with intent to rig bids rather than enter into the joint venture, as asserted by defendant, and that agent acted on defendant's authority); United States v. Smith Grading Paving, Inc., 760 F.2d 527 (4th Cir.), cert. denied, 474 U.S. 1005 (1985) (finding evidence of prior bid rigging relevant to intent and knowledge charged in Sherman Act).
LeDuc v. Kentucky Central Life Ins. Co., 814 F. Supp. 820, 830 (N.D. Cal. 1992) ("Motions to strike are generally not granted unless it is clear that the matter[s] to be stricken have no possible bearing on the subject matter of the litigation."); In Re 2THEMART.COM, 114 F. Supp.2d. at 965 ("If there is any doubt as to whether the allegations might be an issue in the action, courts will deny the motion."); Pease Curren Refining, Inc. v. Spectrolab, Inc., 744 F. Supp. 945, 947 (C.D. Cal. 1990) (denying motion to strike allegations regarding mislabeling and illegal transportation of hazardous substances because even though allegations were not relevant to cause of explosion they were arguably relevant and admissible to plaintiff's punitive damage claim).
In United States v. Southwest Bus Sales, Inc., 20 F.3d 1449 (8th Cir. 1994), the defendants were convicted of conspiring to violate the Sherman Act and of committing mail fraud by suppressing competition for the sale of school buses and bus parts, rigging bids, and fixing prices. At trial, the defendants denied any wrongful acts or involvement in a conspiracy. The Court permitted the Government to introduce evidence of a similar conspiracy to establish that the defendants intended to conspire to violate the Sherman Act and commit mail fraud in the instant case. The other act/conspiracy evidence consisted of (1) a witness who testified that he had previously entered into an agreement with the defendant to allocate school bus sales and to fix prices; and (2) another witness (a former insurance agent for the defendant company) who testified that the defendant submitted bids that were accompanied by fraudulent bid bonds supposedly written by the agent's insurance company which contained fraudulent signatures and documents. Id. at 1455. Evidence of other conspiracies was clearly admissible as 404(b) evidence:
In the case at bar, the evidence of the Minnesota conspiracy and the bid bonds was admissible and relevant to the issue of intent to conspire, motive, and lack of mistake. The evidence of the Minnesota conspiracy was of the exact nature of the charged South Dakota conspiracy, involving bid rigging of bus sales. Similarly, the rigged bid bonds involved the same falsification of documents and signatures as was involved in the mail fraud count and were relevant to the intent and motive surrounding the mail fraud issue.
Id. at 1456.
Similarly, in United States v. Suntar Roofing, 897 F.2d 469 (10th Cir. 1990) the government presented evidence concerning similar customer allocation agreements entered into by the defendants "before and during the time period" of the alleged customer allocation conspiracy to show that the defendants course of conduct was knowing and intentional. The Court held that since "the intent of the conspirators was properly at issue during the trial," the evidence of the defendants' prior agreements were both probative and admissible. Id. at 479.
Like the evidence in United States v. Southwest Bus Sales, Inc. and United States v. Suntar Roofing, Rhone-Poulenc's and Degussa's participation in the bulk vitamins conspiracy is relevant and admissible evidence to prove identity, opportunity, knowledge, "intent to conspire, motive, and lack of mistake." United States v. Southwest Bus Sales, Inc., 20 F.3d at 1456. Their participation in the bulk vitamins conspiracy (as alleged in the Amended Complaint) is of the same nature as the charged methionine conspiracy: in both cases, they are alleged to have participated throughout the 1990's in a conspiracy to fix prices and allocate customers in the feed additives market violation of the Sherman Act. The challenged bulk vitamin allegations are thus analogous to the similar customer allocation agreements entered into "before and during the time period" of the charged conspiracy that were admitted in United States v. Suntar Roofing. The evidence at trial is also expected to show that some of the same individuals who met and discussed price fixing of bulk vitamins had responsibility within the defendant companies for marketing and selling methionine. Hence, just as the Southwest Bus Sales conspiracy evidence was of the "exact nature of the charged South Dakota conspiracy" and "involved the same falsification of documents and signatures" to warrant its admissibility, so too is the bulk vitamins evidence sufficiently connected to the methionine controversy to support its admissibility under Rule 404(b).
In addition to admissibility under Rule 404(b), the bulk vitamins evidence may also be offered as inextricably intertwined with the methionine evidence. In United States v. Andreas, 216 F.3d 645 (7th Cir. 2000), the defendants were charged with participating in a conspiracy to fix prices and allocate customers in the lysine market. The Court admitted evidence of a separate citric acid price fixing conspiracy as inextricably intertwined with the lysine conspiracy:
[A]cts that are so intricately interwoven with the facts of the charged crime [are admissible if omitting] the evidence relating to it would lead to confusion or leave an unexplainable gap in the narrative of the crime.
The citric-acid conspiracy, of which Andreas [a codefendant] was aware, provided the blueprint for and motivating force behind the nascent lysine scheme. Many of the lysine cartel's meetings revolved around the need to allocate sales volume, a lesson dictated by the experience in the citric-acid conspiracy.
Id. at 665.; see also United States v. Williams, 989 F.2d 1061 (9th Cir. 1993) (evidence of one crime can be admitted in trial for other crimes when such evidence is inextricably intertwined); United States v. Soliman, 813 F.2d 277, 279 (9th Cir. 1987) (same).
For this reason, defendants' reliance on Fantasy, Inc. v. Fogerty, 984 F.2d 1524 (9th Cir. 1993), Bianchi v. State Farm Fire Casualty Co., 120 F. Supp.2d 837 (N.D. Cal. 2000), and In Re: Potash Antitrust Litigation, 1994 WL 1108312 (D. Minn. 1994), is wholly misplaced. The Fantasy court merely struck allegations that related to events outside of the statute of limitations. Fantasy, Inc. v. Fogerty, 984 F.2d at 1527. Such is not the situation here: the information contained in the challenged allegations is relevant and admissible to prove antitrust claims that have been brought well within the statute of limitations. Similarly, the Bianchi court struck claims for emotional distress, punitive damages, and attorney's fees because the statute at issue did not allow recovery under those theories. Bianchi v. State Farm Fire Casualty Co., 120 F. Supp.2d at 841-42. This is in marked contrast to the instant matter, as the challenged allegations relate to violations of the Sherman Act which clearly permits recovery for Plaintiffs' claims.
The defendants' reliance on In Re: Potash Antitrust litigation is equally unpersuasive. In Potash, plaintiffs alleged a price fixing conspiracy that began in 1987. Id. at *1. In support, they alleged the history of price fixing in the potash industry beginning in 1927. In reviewing the defendants' motion to strike, the Potash court specifically approved the use of prior conspiracy evidence in antitrust cases. "Naturally, evidence of the Defendants' prior bad acts may be germane, as contemplated by Rule 404(b)." Id. at *5. While the Court did strike allegations of price fixing that occurred in the 1940s, 1950's, and 1960's as too remote, it refused to strike related allegations for the 1980's period that were closer in time to the alleged conspiracy. Id. at *7. Like the allegations approved in Potash, here is a clear nexus in time between the bulk vitamins cartel and the methionine conspiracy. Plaintiffs have alleged that the defendants conspired to fix the price of methionine from at least 1985 to at least 2000. The bulk vitamins cartel involved conduct by the defendants and their competitors throughout the 1990's. Thus, the subject allegations are not ancient history, but rather are relevant events that took place within the time period of the methionine conspiracy.
Inasmuch as the challenged allegations are related to the alleged methionine conspiracy, they are not subject to a motion to strike as "impertinent" or "impermissible" allegations.
B. THE DEFENDANTS HAVE NOT MET THEIR BURDEN OF ESTABLISHING PREJUDICE
None of the defendants can reasonably assert that they will be prejudiced in any material way merely by the inclusion of these allegations in the Amended Complaint. Indeed, defendants Rhone-Poulenc and Degussa themselves are among the sources of the language in the Amended Complaint they now seek to strike. These defendants have publicly admitted that they and their subsidiaries violated U.S. antitrust laws by conspiring with other feed additive companies to fix prices and allocate market shares of the bulk vitamins and feed additives markets. See Declaration of Christopher T. Leonardo, at Ex. 1. Similarly, the Justice Department and the Canadian Competition Bureau issued press reports that detailed the defendants' conduct. See Leonardo Decl. at Ex. 2. These matters are well documented in the public record, and are summarized in plaintiffs' Amended Complaint:
37 . . . Degussa-USA, directly and as agent for Degussa-Huls AG . . . manufactured, marketed, sold and/or distributed methionine and vitamins B3 (niacin) . . .;
38 . . . Degussa AG pled guilty to a criminal violation of United States antitrust laws on May 5, 2000 in the United States District Court for the Northern District of Texas. Degussa AG admitted in its plea agreement that officers and employees of Degussa AG agreed with representatives of competitors to fix prices and allocate customers for the feed additives niacin and niacinamide in the United States;
53 . . . On May 20, 1999, RPSA issued a press release disclosing that Rhone-Poulenc had entered into the United States Department of Justice's Government Leniency program in return for Rhone-Poulenc's agreement to disclose its illegal conduct and that of its co-conspirators in the price fixing conspiracy involving the bulk vitamins market. In the statement issued by RPSA, Rhone-Poulenc admitted that "Rhone-Poulenc Animal Nutrition's global business practices did not meet U.S. legal standards." Thereafter, in related criminal prosecutions in Canada, co-conspirators of Rhone-Poulenc (specifically BASF AG and F. Hoffman-LaRoche Ltd.) pled guilty and further implicated Rhone-Poulenc the vitamins conspiracy by admitting that senior executives of RPSA had met with other vitamins conspiracy defendants to secretly allocate market shares, set prices and/or sales volumes throughout the world, including in the United States.
See Plaintiffs' Amended Complaint ¶¶ 37, 38, 53.
Thus, the allegations that the defendants seek to strike contain public information: anyone with a computer or a library card can look up the information contained in the allegations. See Leonardo Decl. at Exs. 1 and 2; see also Harry First, The Vitamins Case: Cartel Prosecutions And The Coming Of International Competition Law, 68 Antitrust L.J. 711 (2001) (discussing Vitamins litigation and Rhone-Poulenc's and Degussa's participation in global cartel). While defendant Rhone-Poulenc and Degussa may be embarrassed by these facts, that is an insufficient basis to strike these matters from the pleadings on the grounds of "prejudice." Indeed, the challenged allegations are analogous to the public articles and public information that were permitted in In re 2THEMART.COM, supra. that one defendant improperly diverted company funds, and that his co-defendant had pled guilty to conflict of interest as attorney. Id. at 964-66. The proper foundation for the admission of the evidence will be laid by plaintiffs at trial, and can be challenged by defendants at that time. At this early juncture, however, the defendants have no meaningful basis to claim prejudice. See LeDuc v. Kentucky Central Life Ins. Co., 814 F. Supp. at 830 (allegations "supplying background or historical material or other matter of evidentiary nature will not be stricken unless unduly prejudicial"); Clement, 636 F. Supp. at 1333 (denying motion to strike conspiracy allegations because they could relate to a provable claim after discovery was completed and noting that motion to strike is more suitable at summary judgment stage); Pease Curren Refining, Inc., 744 F. Supp. at 948 (denying motion to strike references in complaint to "mislabeling" and "illegal transportation" as "[a]t this preliminary stage, this court cannot determine" that the allegations would not be relevant to proving claim for punitive damages).
Similarly, the remaining defendants cannot show that they are in any way prejudiced by the presence of these allegations in the Amended Complaint. Any risk of prejudice at trial, flowing from a joint trial with defendants who are recidivists, can be cured in the usual fashion through limiting instructions by the Court. United States v. Conners, 825 F.2d 1384, 1391 (9th Cir. 1987) (admitting codefendant's cocaine activities as 404(b) evidence with limiting instruction; evidence was relevant to show defendants' motive for concealing money and to show criminal agreement between defendant and codefendant); United States v. Suntar Roofing, 897 F.2d 469, 479-80 (10th Cir. 1990) (admitting evidence of similar customer allocation agreements entered into by defendants charged with conspiracy to allocate customers in violation of Sherman Act and instructing jury to consider evidence with respect to the particular defendants against whom it was being admitted). At this stage of the proceeding, however, the defendants are collectively no more prejudiced by these allegations than they are by the fact that the Amended Complaint alleges that they joined and conspired to fix prices in violation of the Sherman Act. Federated Department Stores, Inc. v. Grinnell Corp., 287 F. Supp. 744, 747 (S.D.N.Y, 1968) (denying motion to strike in antitrust case and noting "[s]ince the very gist of the complaints alleges wrongdoing in the nature of conspiracy Involving the defendants and others, the use of the label `co-conspirator' or `co-monopolist' can be no more prejudicial to defendants than the complaints themselves.").
See also Manual of Model Jury Instructions for the District Courts of the Ninth Circuit Federal Jury Instructions (Criminal) ¶ 1.5 (2000 ed.); Modern Federal Jury Instructions (Civil: 9th Circuit) ¶ 1.4 (2000 ed.).
Therefore, the defendants cannot establish that they are meaningfully "prejudiced" by inclusion of the bulk vitamins allegations.
CONCLUSION
The challenged allegations in the Amended Complaint are relevant, material, pertinent and admissible. Moreover, the defendants have not shown undue prejudice. For the foregoing reasons, defendants' motion to strike language from the Amended Complaint should be denied.
Respectfully submitted.